Sky TV shareholders stymie INL

By SIMON HENDERY AND NZPA

Sky TV's minority shareholders will have to wait until at least late next year for a sweetened buy-out offer from majority shareholder INL.

INL picked up Telecom's 12 per cent stake in the pay television company through an offer first announced in August, taking its holding in Sky to 78.2 per cent.

However, shareholder anticipation of a better deal further down the track pushed Sky's share price above the value of the offer - $3.35 cash plus three INL shares for every 10 Sky shares held.

The offer closed on Friday and INL revealed yesterday that as a result of acceptances from shareholders other than Telecom it had increased its stake in Sky by a meagre 0.1 per cent, to 78.3 per cent.

INL sold almost its entire newspaper and magazine titles to Australia's John Fairfax Holdings for $1.2 billion in June.

Its only other publishing asset, Victoria's Geelong Advertiser newspaper and magazine group, went to News Limited for $64 million in August, leaving it with cash and its Sky stake.

INL executive chairman Ken Crowley said yesterday the company planned to distribute about $340 million - or 78c a share - to INL shareholders in April or May next year.

As part of the deal which secured Telecom's stake in the company for $156 million, INL agreed not to acquire Sky shares for a higher price for 12 months from the time the offer was announced.

Sky shareholders obviously felt their shares were worth more than INL has so far offered, Macquarie Equities investment adviser Arthur Lim said.

"Sky TV shareholders are taking the view that ... after many, many years of cash-burn, it has built up economies of scale, presence in the marketplace, a digital pay-TV monopoly in New Zealand and it's now very well positioned to leverage off that position."

He expected INL to remain a separate entity on the market and to make another tilt at Sky when it was free to do so.

"From INL's perspective it makes it a lot more desirable to have 100 per cent so that INL can freely access the cashflow of Sky TV."

The other option, liquidation, would not suit INL's 45.1 per cent owner News Corp, which found the Sky stake attractive, Lim said.

However, remaining an investment vehicle also did not make a lot of sense because INL had no other major investments and it was simply duplicating costs.

To trigger an automatic takeover, INL must secure 90 per cent of Sky.

Its biggest obstacle to reaching that mark will be Australian fund manager Colonial First State, which is now Sky's second largest shareholder and increased its stake during the just-completed takeover offer from 5 per cent to 7 per cent.