INL increases stake in Sky

By RICHARD BRADDELL utilities writer

Independent Newspapers says it wants Sky Television to remain a listed company, despite planning to boost its shareholding from 49 per cent to 66 per cent after buying Todd Corporation's 11 per cent stake.

In a move primarily aimed at giving INL access to Sky's tax losses, Todd will exchange its 42.5 million Sky shares for an equivalent number of new INL shares.

In a separate but accompanying move, INL will bid on market for a further 23.5 million shares at prices between $3.30 and $3.60 for up to 23.5 million shares.

In all, INL will outlay a maximum of $84.5 million in cash.

Neither set of transactions can take place until restricted transaction notices expire on May 28.

INL chief executive Tom Mockridge said the transactions were aimed at taking INL's ownership of Sky to 66 per cent, at which point it could group Sky's tax losses.

But the move was no precursor to a merger since INL wanted to retain Sky as an independently listed company whose performance could be measured and benchmarked against its peers overseas.

"There have been plenty of examples around the world where companies, and even related businesses, merge and actually diminish the value," Mr Mockridge said.

Nevertheless, the move should give a useful boost to INL's bottom line, which has suffered from the inability to offset losses incurred by Sky against its own profits.

In the first half of this financial year, Sky's equity accounted losses sliced $9.6 million from INL's bottom line with no related tax benefit.

"All those sterling newspaper guys make a decent profit, but it takes a big hit because of the investment in Sky," Mr Mockridge said.

As a result of the transactions, the stake of INL major shareholder News Ltd will drop to 44.4 per cent from 49.3 per cent, while Todd Capital will leapfrog Telecom as the second-largest shareholder, with 14.5 per cent.

Telecom's 10 per cent stake will fall to 9 per cent.

Mr Mockridge said News Ltd was unlikely to lift its stake back to 49 per cent.

And he said the agreement imposed no restrictions on Todd with regard to its INL stake once the transaction was completed.

The decision to lift INL's Sky holding was not aimed at heading off Telecom, which in February spent $193 million buying the 12.2 per cent of Sky previously owned by Tappenden Holdings.

Mr Mockridge said the deal was neutral in terms of the relationship with Telecom.