Rupert Murdoch's News Corp could face a struggle in its bid to strengthen its hold on Sky Television.
News Corp yesterday announced a $272 million deal to buy Telecom's 12 per cent stake in Independent Newspapers - the company that no longer runs any media operations but owns a 78
per cent stake in Sky.
The deal is at $6.19 a share and would yield an $86 million profit for Telecom.
However, the agreement is subject to conditions including INL shareholders approving the increase of News' interest in INL.
One question is whether minority shareholders in INL, including Todd Capital on 14 per cent, will agree.
INL closed yesterday unchanged at $6 - 19c lower than the price in the News Corp/Telecom deal.
"Would you be happy as a minority shareholder?" was one analyst's rhetorical question.
The deal is also subject to approvals from the High Court and INL and Sky shareholders for a scheme of arrangement to merge INL and Sky.
INL is already 44 per cent owned by News Corp.
Telecom sold its 12 per cent stake in Sky two years ago for a $28 million profit. The company bought into INL five years ago as part of a strategy to bundle its phone and internet services with Sky's pay TV content.
Telecom corporate affairs manager Philip King said the aim then was a strategic relationship with content suppliers.
Having established a relationship with Sky, Telecom no longer needed to own shares in Sky directly or indirectly through INL.
He said the shareholding had been "helpful".
"It enabled us to have conversations with Sky and opened up avenues which we hadn't been able to achieve before.
"Our assessment is that we have achieved what we need to achieve. We have a relationship with Sky as our preferred content supplier and that, we think, will have us in good shape ... for the next few years."
INL sold its publishing stable of 80 newspapers and magazines to Australia's John Fairfax Holdings in 2003 for $1.2 billion. Without Telecom's stake in INL, News Corp would have just over 34 per cent of the merged INL and Sky company. With the stake, it will own about 44 per cent.
- NZPA, staff reporter
