Consmedia going private
Published in the Canberra Times, April 2010
Consolidated Media Holdings' proposed share buyback is a likely first step in taking the publicly listed company private, analysts say.
ConsMedia said late on Friday it would seek shareholder approval to use $225 million to buy back 11.88 per cent of the company's 620.71 million shares on issue.
The company, which has been mulling over options for its large cash balance for months, had $251.5 million in the bank at April 16.
If given the green light by shareholders, the proposal could allow ConsMedia's two largest shareholders - James Packer's Consolidated Press Holdings and Kerry Stokes's Seven Network – to increase their grip on the comp any.
Mr Packer holds 45.3 per cent of ConsMedia, while Mr Stokes has a 22.1 per cent stake.
Assuming neither took part in the buyback, Mr Packer would emerge with majority control of ConsMedia, while Seven would increase its stake to about 25 per cent.
Independent analyst Peter Cox from Cox Media said privatizing ConsMedia would "definitely" be on Mr Packer's agenda.
But Mr Cox said there was likely to be less of a sense of urgency for Mr Stokes to take ConsMedia private.
"The bottom line is it allows the controlling shareholders to squeeze out the smaller shareholders and increase their holding," Mr Cox said yesterday.
ConsMedia owns half of Premier Media Group, which produces the Fox Sports channels, and a quarter of Australia's biggest pay TV provider Foxtel.
The company described the buyback as "an appropriate use of cash in the absence of an appropriate investment or acquisition opportunity".
"It also reduces the uncertainty for all shareholders in relation to the use of the surplus cash," ConsMedia said in its notice of meeting on Friday.
But the company also acknowledged there were downsides to the buyback, such as being unable to frank any dividends to be paid during the year ending June 30, 2011, and potential exclusion from S&P/ASX indices.
Wealth Within chief analyst Dale Gillham said it would be no surprise if ConsMedia became a private company.
Mr Gillhain said James Packer's father, Kerry, was no fan of running a listed company.
"Kerry always preferred to be a private company because obviously then you are not responsible to the Australian stock exchange and you don't have to have all your financials out there," Mr Gillhain said.
"It wouldn't surprise me if James is of the same ilk and wanting to do that as well."
An independent expert's report prepared by Deloitte Corporate Finance valued the ConsMedia shares between $3.33 and $3.73.
ConsMedia closed Friday's trading day at $3.10.
Shareholders will vote on the buyback at a general meeting on Friday, May 28, in Sydney.
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