Giant US TV company, CBS will acquire the failed Network Ten, for an unknown amount.
The deal means the US broadcaster has beaten out favourites Lachlan Murdoch and Bruce Gordon who last week had their proposed joint offer cleared by the ACCC.
That bid needed media law changes to pass the Senate, but CBS has signed a binding deal that will need only approval from FIRB.
The deal is expected to settle by the end of this year. Ten creditors meet next month for a second time and are now expected to have an easy decision to approve the sale of the company to CBS.
Ten shareholders get nothing, CBS will refinance Ten’s existing debt, including the loan from Commonwealth Bank and guarantor fees of about $33 million owed to James Packer, Mr Murdoch and Mr Gordon, and will implement a deed of company arrangement, according to KordaMentha.
Secured loans include at least $98 million to Commonwealth Bank (of a $200 million facility), $841,000 to Westpac and $640,000 to ANZ Bank, according to a list of creditors. This means CBS will take over Ten for about $123 million. CBS will forgo its debt.
The US studio picked up an information memorandum on Ten, as as one of Ten’s largest creditors after making a $795.5 million claim after the company collapsed. The statement of affairs said CBS was owed a total of $840 million under content sale agreements that extent into the future. That has now gone.
Prior to Ten going into administration, CBS had agreed to a draft deal to reduce the cost of its output contact with the struggling Australian free-to-air broadcaster in return for equity. The push into administration in mid June (via a threat from Messrs Murdoch and Gordon) stymied that possible deal. More importantly, CBS will also provide “immediate finance to Ten – in other words to make sure it remains solvent.
The US studio holds a 33% stake in ElevenCo – the parent company of digital channel Eleven – and Ten holds the remaining two thirds. The ElevenCo board consists of Ten and CBS executives and that has given CBS a clear and detailed understanding of the local free-to-air market.
While bringing a major new competitor to the small Australian market, CBS’s purchase of Ten will be welcomed by the rest of the media sector, but not the Murdoch clan’s News Corp or Foxtel.
It has stopped their plan to grab Ten and merge Lachlan Murdoch’s radio business into News Corp. News Corp is now embarking on the restructure of Foxtel to accommodate Telstra’s desire to sell down its 50% stake and quit the pay TV business and focus on its own rapidly growing subscription operation.
CBS is larger than the Australian media sector – including News Corp with annual revenues of more than $A16 billion and earnings before interest and tax of over $A3 billion. Its current market cap its over $A28 billion on the New York Stock Exchange. That makes it a formidable competitor for all Australian media
Because CBS brings new competition to the Australian media market the industry believes that proposed the media law changes (ending the reach rule, softening ownership rules and formalising the abolition of the licence fees and its replacement with a smaller spectrum fee) will now go through the Senate.
That’s because CBS brings genuine competition to the Australian broadcast market. Yesterday’s statement made it clear that the streaming service, CBS: All Access (https://en.wikipedia.org/wiki/CBS_All_Access) would start as soon as possible in Australia a move that will change the local broadcast TV market. It will replace expand the existing tenPlay with CBS: All Access added.
“CBS will also launch CBS All Access, (next year) the Company’s digital subscription video on-demand service, in the Australian market. This marks another international territory announced for CBS All Access this month. The Company recently unveiled plans to make the service available in Canada next year,” The statement said.
It costs $US5.99 a month in the US or $US9.99 for ad free streaming and with that you get all the CBS live programming us access to back catalogues of CBS programs and sport (such as NFL games).
“Network Ten is a prime broadcasting asset with over half a century of experience and brand equity in Australia,” said Leslie Moonves, Chairman and CEO, CBS Corporation said in the CBS statement on Monday. “We have been able to acquire it at a valuation that gives us confidence we will grow this asset by applying our programming expertise in a market with which we are already familiar.”
CBS is controlled by the Redstone family (Sumner Redstone founded it but after a nasty court case in 2016 he is now no longer involved and his daughter, Shari Redstone is the day to day boss) through a company called National Amusements, which also controls Viacom (MTV and Universal Studios). That’s a lot of programming clout.
CBS’s statement listed its busiensses "CBS’ businesses include CBS Television Network, The CW (a joint venture between CBS Corporation and Warner Bros. Entertainment), CBS Television Studios, CBS Studios International, CBS Television Distribution, CBS Consumer Products, CBS Home Entertainment, CBS Interactive, CBS Films, Showtime Networks, CBSSports Network, Pop (a joint venture between CBS Corporation and Lionsgate), Smithsonian Networks, Simon & Schuster, CBS Television Stations, CBS Radio and CBS EcoMedia.
CBS Radio is in the process of being sold to a company called Entercom.
