Market close: Sky TV shares fall as investors weigh possible Mediaworks acquisition

The S&P/NZX 50 Index fell 151 points, or 1.3 per cent, to 11,265.70. Photo / Greg Bowker

New Zealand shares fell on Tuesday as investors returned from the long weekend to find Sky Network Television was more likely to make an acquisition than be bought out itself.

The S&P/NZX 50 Index fell 151 points, or 1.3 percent, to 11,265.70. Turnover was $132 million.

Last week, investors were excited by rumours, published in the Australian Financial Review, that private equity funds had been asked to consider buying Sky TV.

Shares in the pay-television company jumped more than 7 per cent on the prospect of a $500m takeover and an easy exit for investors.

Today, that share price spike was completely reversed as a new report emerged that Sky TV was itself on the hunt for a sizeable acquisition: Mediaworks, a radio and advertising business recently valued at roughly $150m.

Sky TV confirmed this report and said it was in "exclusive negotiations" with Mediaworks' owners, but the transaction was "still highly uncertain".

If the deal is struck, it would likely mean a private equity buyout would be off the cards in the immediate future.

Equity analysts were sceptical of the deal. Morningstar's Brian Han said it was "puzzling" and questioned whether it was a negotiating tactic.

Media commentators saw more sense in the deal. Spinoff founder Duncan Greive said it would bulk up Sky's advertising business and give the group much more diversification.

Investors appear to have preferred an alternative aquisition target and Sky shares fell 7.2 per cent to $2.45. Shareholders would have to approve the acquisition, if it were to go ahead.

Elsewhere on the market, most stocks were heading lower. The key detractors from the index were Pacific Edge, which fell 5 per cent to 75 cents, Mainfreight which dropped 4.2 per cent to $78.11, and Fisher & Paykel Healthcare, down 3.3 per cent at $20.10.

Serko was up 1.7 per cent at $3.66, the biggest gain on the top 50 index, while Ryman Healthcare was up 1.3 per cent at $9.37.

Outside of the index, Metro Performance Glass jumped 8.5 per cent to 25.5 cents and Hallenstein Glasson Holdings rose 4.3 per cent to $5.99.

Nick Smyth, a strategist at BNZ bank, said global interest rates climbed after US employment data looked strong on Friday night and China loosened covid restrictions on the weekend.

The higher rates, driven by market expectations that the US Federal Reserve will tighten monetary policy as planned, weighed on equities, and boosted the US dollar, he said.

The NZ dollar was trading at 64.69 US cents at 3pm in Wellington, down from 65.55 cents on Friday. The trade-weighted index was at 71.96, from 72.59 yesterday.