The chances of a deal being done on the sale of Australian regional Pay TV group Austar have increased after its controlling shareholder, Liberty Global of the US, won an auction on Monday to buy Germany’s third largest Pay group for $A4.47 billion.
Liberty, which controls Austar via a 55% shareholding, said its purchase of Kabel BW Erste Beteiligungs GmbH, or KBW, was subject to regulatory approval and would take place through a series of transactions.
The deal may have trouble though because in 2009, Liberty (which is controlled by John Malone, the man who greenmailed Rupert Murdoch five years ago) bought Unitymedia, Germany’s second biggest cable group in 2009.
Approval will cut the number of big cable groups in Germany from four to three, with Tele Columbus boasting about 2 million subscribers, Unitymedia-Kabel BW 8 million and Kabel Deutschland around 12 million.
Everyone is saying there won’t be any regulatory problems, but Liberty will now be the second biggest Pay TV operator in Europe’s biggest media market and economy.
And Germans do not like outsiders, especially Americans, having such power.
Rupert Murdoch is already in the German market with the Sky Deutschland satellite Pay TV group and that could help Malone and Liberty get the final approval.
There was media talk after the winning deal was revealed, that Liberty might cut some cable prices in Germany to help convince the regulators.
And why will it raise the chances of the sale of Austar?
Well The Financial Times reported that to finance the deal, "banks offered a €2bn loan, equivalent to 6.3 times last year’s earnings before, interest, tax, depreciation and amortisation of €316m, people close to the deal said. This makes it one of the most highly leveraged deals in Europe since 2007".
That means Mr Malone will need some cash, just for a rainy day. His stake in Austar is that cash, if he sells.
The sticking price is around $1.50, which he wants for his stake. Foxtel (News Ltd, Cons Media and Telstra) don’t want to pay that and are thinking more around $1.25 a share, perhaps $1.30. Back in 2009 when the same talks were underway, Mr Malone wanted around $2 an Austar share, Foxtel wanted to pay $1.80 at best.
Austar is currently valued at $1.5 billion and the shares traded yesterday at $1.25 each. That was up half a cent on the day.
At $1.50 a share the company would be valued at more than $1.8 billion and Mr Malone would get close to $1 billion from the sale.
