Sky offer set for good reception

By SIMON HENDERY media writer

Idependent Newspapers' takeover offer for Sky TV looks destined to succeed, meaning another listed company is likely to go off-air soon.

INL, the former publisher turned cashed-up 66 per cent Sky shareholder, yesterday revealed a cash-plus-shares takeover offer for the rest of the pay-TV network.

With Sky's only other major shareholder, Telecom, supporting the deal, and enough sweetening to make it attractive to smaller investors, INL seems likely to reach the 90 per cent stake it needs to compulsorily acquire the balance.

Once that happens, Sky - one of the stock exchange's 10 biggest companies by market capitalisation - will disappear and INL will pick up the Sky name.

INL chairman Ken Cowley said the board believed the takeover offer as proposed was the best way forward for INL and its shareholders.

Telecom holds 12 per cent of Sky and stands to receive about $150 million in cash plus its share of the distribution of INL's remaining capital.

Combining its present 9.2 per cent INL holding and the new shares it will receive under the takeover deal, Telecom will end up with about a 10 per cent stake in the new-look company, a level chief executive Theresa Gattung said would "ensure we continue to have a meaningful investment in the pay-TV industry in New Zealand, which we regard as strategically important for our future".

Cowley said the INL board had decided on the deal yesterday but formal notice of the offer would not be made until a prospectus had been registered and was available to Sky shareholders.

That formal notice was expected to be made in mid-September and the offer should be sent to Sky shareholders in early October. They have 30 days to accept it.

While the deal is unconditional, with INL and Telecom's combined stake at 78.2 per cent and no other shareholder holding more than 5 per cent, INL is not likely to strike resistance in reaching 90 per cent.

Macquarie Equities' NZ investment director, Arthur Lim, described the offer as an attractive "self-correcting deal" because it included INL shares as well as cash.

"One would anticipate that some of the Sky TV shareholders, if they wanted to maintain their shareholding in Sky, would use the cash proceeds [of the deal] and buy INL shares."

INL's cash reserves were bolstered yesterday by the announced sale of its last publishing asset, Victoria's Geelong Advertiser newspaper and magazine group, to News Limited for $64 million. The Rupert Murdoch-controlled News owns 45 per cent of INL.

Once the Sky takeover is complete, INL will have about $375 million in capital - or 80c a share - to return to shareholders.

INL yesterday reported a profit for the year to June 30 of $388.48 million, which included $292.4 million from the sale of its publishing assets to John Fairfax Holdings in April.

It will pay a final dividend of 5c a share.

The offer

* INL is offering Sky TV shareholders $3.35 cash per share plus three INL shares for every 10 Sky shares.

* At yesterday's closing market prices, the deal is worth $610 million $440 million in cash plus $170 million worth of INL shares - or about $4.64 a Sky share.

* INL and Sky would be amalgamated into one company, which would retain the Sky name.

* All surplus capital in INL, expected to be about $375 million, or 80c a share, would be returned to shareholders by the end of next February.