Sky's future unknown as INL accepts Fairfax deal

By SIMON HENDERY

A full takeover of Sky TV remains up in the air after INL yesterday agreed to sell its publishing business to Australian media group Fairfax.

John Fairfax Holdings, Australia's second-largest publishing group, said it would buy INL's publishing assets, excluding Victoria's Geelong Advertiser, for $1.188 billion in cash, in a deal 65 per cent financed by debt.

The sale will leave Independent Newspapers with a pot of money, its 66 per cent stake in Sky Network Television and the question of where it goes from there.

INL chief executive Peter Wylie said he would leave New Zealand following the sale, prompting speculation that the company would be wound up, with its cash and Sky shares returned to shareholders.

An INL spokeswoman said the board had not considered the future of its Sky holding, but would do so in the next few weeks.

Ideally, the company would be in a position to put a proposal on Sky's future to shareholders at the extraordinary general meeting needed to approve the Fairfax bid, she said. That meeting is likely to happen next month.

Trading in INL shares was halted on Friday pending an announcement of the result of negotiations with Fairfax. The deal price is expected to add about 30 per cent to their value when trading resumes today.

Views differ over whether INL's major shareholder, Rupert Murdoch's News Corp, which owns 45 per cent, will launch a full takeover for Sky. Sky's share price continued to climb yesterday on speculation that it would.

Murdoch has been expanding his international satellite television interests and last week secured the purchase of DirecTV in the US for US$6.6 billion ($12.2 billion).

But Nat Vallabh, of AMP Henderson Global Investors, said Murdoch might be happy with about 30 per cent of Sky. "They [News Corp] are happy to have a large holding but not necessarily a controlling holding, so there's no real imperative for them to ... make a bid for Sky."

Fairfax chief executive Fred Hilmer said the group expected A$2.5 million ($2.8 million) in synergy benefits from its purchase of INL's businesses, which include Wellington's Dominion Post, the Christchurch Press, seven daily regional titles, 61 community papers, the country's two Sunday newspapers, magazines including TV Guide and New Zealand House and Garden, distributor Gordon & Gotch, and the Stuff website.

INL employs 2800 staff and the acquisition will mean 30 per cent of Fairfax's revenue and operating earnings will be generated in New Zealand.

Fairfax's Australian mastheads include the Sydney Morning Herald, the Melbourne Age and the Australian Financial Review.

The company's New Zealand operation will be headed by Brian Evans, who has been group general manager of Fairfax Regional and Community Newspapers.

Evans said the group was not planning editorial cuts or redundancies. "Quite the opposite - we actually want to grow the business."

Brendan Hopkins, chief executive of New Zealand's other major publisher, Sydney-based APN News & Media, said Fairfax's entry into New Zealand did not pose a threat to APN, which owns the New Zealand Herald.

APN shares closed down 12Ac at A$3.23 ($3.57) yesterday.

Responding to a suggestion that the acquisition blocked any plans by APN to buy Fairfax, Hopkins said: "APN has absolutely no interest in Fairfax and hasn't for some years."