Sky deal: getting away with Murdoch

By Karyn Scherer

Between the lines


In a couple of months' time, TVNZ expects to report its profit for the first six months of 1999.

According to the state-owned broadcaster, it will be a "very satisfactory" result - as you would expect from an enterprise that has spent the past two years slashing costs and flogging off assets as if its life depended on it.

Its coffers have certainly been significantly boosted in recent weeks with two major asset sales: its 25 per cent stake in Clear Communications, and its 12.6 per cent stake in Sky TV.

How much it got for its stake in Clear is not yet known, but presumably it was significantly more than the $40 million it was listed at in its last annual report. As for Sky, the price it received is a matter of public record: $126.7 million.

Given that it has so far handed back just $70 million to the Government, it is understandable why TVNZ executives are wearing big grins right now.

However, not everyone is happy about the Sky deal. TVNZ's decision to accept $2.75 a share from three existing shareholders - INL, Craig Heatley and the Todd Corporation - has angered a consortium of six institutions, whose higher offer of $2.90 a share was turned down.

INL must certainly be chuckling to itself. When it agreed a price with TVNZ, Sky was trading at around $2.85. By the time its offer was accepted, it was trading at around $3.20. It has since shot up to around $3.45.

According to TVNZ, it wants to remain on-side with Sky, given that Sky uses its broadcast arm, BCL; that it contracts TVNZ to film major events; and has other "commercially sensitive programming arrangements". Not mentioned, but presumably also important, is its desire to strike a deal with Sky over the issue of set-top boxes once it begins its own digitial transmissions.

Such relations, it insists, "established a threshold that other straight cash offers would be required to exceed".

But what has puzzled brokers representing several of the institutions involved in the higher bid is TVNZ's apparent reluctance to even consider another offer.

The deal, they claim, makes a mockery of the "notice and pause" provisions which exist precisely to ensure this sort of thing doesn't happen. It would certainly appear that minority shareholders have got a raw deal.

Sky has denied it has any contracts with TVNZ that would help explain the cosy deal. But so far, TVNZ has been remarkably coy about exactly why it was willing to forgo that extra $7 million.

If there is indeed some sort of goodwill or even some sort of contract, whether implicit or explicit, which was factored in to the price, then other shareholders - and all taxpayers - deserve to know exactly what that is.