INL not likely to up stake in Sky TV with Aussie sales proceeds

By NZPA

Friday 21st June 2002

Local analysts today played down speculation media group Independent Newspapers Ltd is exiting its Australian newspaper operations in order to drum up cash for another grab at pay-TV operator Sky Network Television.

INL, 44-percent owned by Rupert Murdoch's News Corp Ltd, announced on Wednesday it was selling two of its Australian newspapers -- the Bendigo Advertiser and the Wimmera Mail-Times -- to Rural Press subsidiary Regional Publishers (Western Victoria) Ltd.

The sale was viewed by some Australian media analysts as a sign INL may be gearing up for a full takeover of its 66-percent owned subsidiary Sky TV.

But DF Mainland head of research Bruce McKay said today the gap between the money generated from the newspaper sales and that needed to buy out Sky's minority shareholders was too broad to assume a link between the two events.

"I've heard this story that INL are dead keen on buying some more of Sky, which -- given that they own 66 percent -- is probably not an unreasonable assumption to make.

"But the two newspapers are fairly small businesses... in terms of going out and buying a big chunk of Sky, it wouldn't sort of set the world on fire," Mr McKay told NZPA.

Another local analyst agreed.

"Work out how much it would cost them to buy the rest of Sky and then roughly estimate what they got from the sale of the two newspapers -- I think you'll come to a pretty quick conclusion," the analyst said.

Shares in Sky TV last traded two cents lower at $4.70, meaning INL would need roughly $600 million to acquire the remaining shares it doesn't own.

No price was revealed for the Australian newspaper sale, but it is thought to be closer to $10 million, than hundreds of millions.

Mr McKay said INL could probably pick up another 1-2 percent of Sky TV with the proceeds of the Australian sale -- something it is allowed to do under the Takeover Code's "creep" provisions.

"But they would be just as well to invest the money in other parts of their business.

"Making the leap to say that obviously the money is going to be used to invest in Sky is probably drawing too much of a bow from it.

"It is more likely that they will say: "Well, we've got some millions of dollars, what do we do? Let's just go and pay off some debt, or find another part of the business that needs some money spent on it"," Mr McKay said.

He said Sky's share price would need to plummet to much lower levels before a full takeover looked attractive -- an unlikely scenario given current conditions.

DF Mainland has a price target on the shares of about $5.50.

"I would say there's plenty of room on the upside there, it's only going to get more expensive."

INL chief executive Tom Mockridge was unavailable for comment today. He said in a statement earlier this week that the Australian papers were being sold as they were not seen as part of INL's core business.

The sale is conditional upon completion of due diligence and formal documentation, with a target settlement date of July 1.

INL bought the two papers, as well as the Geelong Advertiser and magazine distribution business Gordon and Gotch, from News Corp in 1990.

INL owns around half of New Zealand's newspapers including the Dominion, the Evening Post, the Press, Christchurch, and the Sunday Star Times.

Rural Press publishes a number of titles in Victoria including the Ballarat Courier, the Ararat Advertiser, the Stawell Times-News and Stock & Land.

Shares in INL last traded up four cents today at $3.94.

Meanwhile, Sky TV said today it had more than 500,000 subscribers, or 37 percent of all New Zealand householders.

As at June 20, Sky recorded a total subscriber count of 501,886 -- 135,992 analogue subscribers and 365,894 broadband subscribers including digital, commercial and others delivered through resale agreements.

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