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Blackstone Group and Carlyle Group may join forces to bid as much as A$2.7 billion ($3 billion) for Ten Network Holdings, Australia's third-ranked television broadcaster, two people with knowledge of the matter said.
The US firms are in a stronger position after Merrill Lynch's buyout unit and San Francisco-based Hellman & Friedman pulled out on concern the price is too high, said the people, who declined to be identified as the talks are private.
NBK Capital, National Bank of Kuwait's investment banking unit, is also bidding.
Blackstone and Carlyle are considering teaming up after making separate offers between A$2.70 and A$2.90 a share for Sydney-based Ten, the sources said. Ten's parent, CanWest Global Communications, has been holding out for more than A$3 a share. The sale may collapse if no agreement is reached in the next two weeks, they said.
"They'll be haggling about it," said Andrew Anagnostellis, a Sydney-based media analyst at Deutsche Bank. "Free-to-air TV has got some structural issues, pay TV is taking away viewers, and it's losing market share to the internet."
CanWest of Winnipeg, Canada, is considering a sale of Ten to raise money after earnings at its Canadian television stations fell 75 per cent. The company hired Citigroup in October to advise on a possible disposal of its 56.4 per cent stake.
Ten shares rose as much as 2.2 per cent, trading around A$3.24 yesterday on the Australian Stock Exchange.
The stock has slipped 1.5 per cent this year, compared with the 4 per cent gain of the 11-member S&P/ASX 200 Media Index. The network is trading at about 14 to 15 times 2007 earnings before interest, tax, depreciation and amortisation (ebitda), according to analysts at UBS.
Publishing & Broadcasting and Seven Network agreed last year to sell TV assets for about 11 to 12 times ebitda.
Ten's net income fell 12 per cent to A$37.7 million in the six months ended February 28 as it increased spending on new programmes.
The number of primetime free-to-air viewers aged 16 to 39 in Australia stabilised last year after slumping 17 per cent from 2001 to 2005, analysts at Merrill Lynch in Melbourne wrote in a note to clients this week. They expect the decline to resume this year.
Ten targets these viewers with reality shows such as Big Brother and The Biggest Loser.
CanWest's holding includes stock as well as debentures that can be converted into 455 million shares. Including net debt of A$508 million, Ten was valued at A$3.5 billion, based on Wednesday's closing share price.
Ten in December agreed to help CanWest find a buyer for its stake, on condition that the bidder also buys out minority shareholders and acquires the entire company.
-BLOOMBERG
Austar Soars On Foxtel Tip
Shares of Austar United Communications Network, the Australian pay-TV company controlled by US billionaire John Malone, rose the most in almost three years on reports Foxtel Management plans to buy the company.
Foxtel, the nation's biggest pay-TV network, may offer A$1.80 a share for Sydney-based Austar, the Australian Financial Review reported yesterday. The bid could also be lodged separately by Foxtel's owners, Rupert Murdoch's News Corp and James Packer's Publishing & Broadcasting, which run the network with Telstra, the paper said.
Austar, which provides subscription television to more than 600,000 households in rural and regional Australia, said last month it received "preliminary" approaches, without naming the bidders.
Foxtel, which services the nation's major cities, would be the likeliest buyer as it aims to expand its 1.3 million customer base, according to analysts at JPMorgan Chase and UBS.
Austar jumped A14.5c, or 9.1 per cent, to A$1.74, the biggest gain since August 2004, valuing the company at A$2.3 billion.
-BLOOMBERG
