Lachlan Murdoch, son of News Corp Chairman Rupert Murdoch, is teaming with James Packer to offer more than $3.3 billion to buy out Consolidated Media Ltd, the media rump of the old PBL spun-off late last year.
Murdoch, who quit as deputy chief operating officer at News in July 2005, and Packer are offering $4.80 a share in cash and shares in seek (27% of which is owned by CMH), according to a statement issued late yesterday by CMH.
Seek shares surged 49c yesterday to $7.15 in the expectation it would be involved in some sort of corporate play: it is, but isn't the focus of the deal.
CMH said Consolidated Media Holdings had received an indicative proposal to acquire 100 per cent of the company from Lachlan Murdoch's private vehicle Illyria Pty Ltd.
The deal unites the two media sons who combined in the now failed OneTel to lose well over $1.2 billion when that Telco collapsed in 2001.
A court case over that failure involving the ASIC prosecution of OneTel founder, Jodee Rich, is continuing in the NSW Supreme Court.
Mr Murdoch will have to find $1.4 billion. Cons Press has more than $760 million of cash on hand after receiving $3 a share in the split up of PBL into Crown and CMH late last year.
Mr Packer will move from 38% of CMH and its mixed bag of investments, to a 50% stake with Mr Murdoch.
CMH owns 25% of Foxtel, 50% of Premier Media Group, which controls Fox Sports, 27% of Seek and 25% of PBL Media (CVC the other 75%) which controls the Nine Network, Ticketek and other related businesses.
Just why Mr Packer has moved to mop up CMH with Mr Murdoch so soon after the split (the company will probably be able to report an interim result next month) was not explained yesterday.
The indicative and conditional proposal implies consideration of $4.80 for each Cons Media share, valuing the target at $3.31 billion.
CMH closed on Friday at $3.86, which valued the company at $2.66 billion.
The offer price is effectively $4.80, being $4.06 cash and a proportion of shares in Seek, the employmenmt group 27% owned by CMH.
So in effect, CHM shareholders (including Cons Press with 38%) are being offered cash and the seek shares they already own.
"The Proposal also includes a facility under which CMH shareholders would be able to elect to receive a greater proportion of their consideration in cash or SEEK shares," CMH said in its statement.
"The actual mix for those CMH shareholders who make such an election would depend on the elections of all shareholders as the total SEEK share consideration will be fixed at 76,968,490 SEEK shares and the total of the fixed cash component of the consideration will be fixed at $2.8 billion."
Under the deal, Illyria (Lachlan Murdoch) and its equity partners would create a 50-50 joint venture with Cons Media's major shareholder Consolidated Press Holdings Ltd (Conspress) as part of a consortium.
Cons Media said Conspress has given its support to the proposal.
But it has been has not yet reached final agreement with Illyria as to the terms of the consortium.
Cons Media said the offer comprises of a fixed cash amount of $4.06 per share plus a variable cash amount, which is yet to be determined.
The implied consideration of $4.80 for each Cons Media share is based on the closing price of SEEK shares on 18 January.
The consortium has stated that this is the final price for the joint venture proposal.
Cons Media said the proposal is indicative only and is subject to a number of pre-conditions including due diligence, financing, shareholder approval and several other conditions.
The board of Cons Media met on Monday to commence consideration of the proposal, it said.
"The Conspress nominees on the board of CMH, Messrs James Packer (executive deputy chair), Ashok Jacob and Michael Johnston have declared their interests and have stepped aside from the board's consideration of the proposal," it said.
Mr Packer has relinquished his position and Richard Turner has been appointed in his place until the proposal has been fully considered.
Cons Media has set up an independent directors sub-committee to assist the evaluation of the proposal. It will be chaired by Mr Turner and other members are Chris Corrigan and Geoff Dixon.
CMH said "If the Proposal is to proceed, a detailed information memorandum will need to be prepared and dispatched to all CMH shareholders which will include an Independent Expert's report opining on whether the Proposal is in the best interests of CMH shareholders. If the Proposal proceeds by way of a scheme of arrangement, it must also be approved by the Court."
As the documentation for the split of PBL last year contained an enormous amount of information about CMH, preparation and dispatch of the information memorandum shouldn't be too hard.
