Atairos has been involved in a New Zealand deal before. It took a 50 per cent stake in Swedish gaming firm MTG to help it finance its $203m purchase of Kumeu-based Ninja Kiwi, a maker of smartphone games.
However, the Herald understands from a well-placed source that while Atairos did kick Sky’s tyres ahead of a recapitalisation in 2020 (ultimately filled by a $157m rights issue), it has “zero interest” now.
Two other US private equity investors, Apollo Global Management and Silver Lake, could also be in the frame, Dataroom says (although given Silver Lake’s stake in NZ Rugby, that could mean one Silver Lake entity selling All Blacks rights to another).
In August, Apollo named former Telstra and GE Australia-NZ executive David Moffatt (not to be confused with ex-NZ Rugby CEO David Moffett) as chairman of its Australia and New Zealand operation to “drive continued expansion in the region”.
A spokeswoman for Silver Lake had no comment. Apollo could not be immediately reached for comment.
Sky TV shares spiked from $2.47 to $2.80 as a trading halt was lifted following Friday’s pre-market announcement.
The stock closed yesterday at that level. The pay-TV broadcaster has yet to make any further comment. The mooted bidders have been asked for comment.
This morning, Sky had no comment about the mooted mystery buyers, but did confirm that Jarden is advising it on the mystery bidder’s approach. Jarden was also Sky’s adviser for the 2021 approaches.
Earlier this week, the approach from a mystery potential buyer led to a pair of analysts ticking off Sky TV’s attractive points - and speculating on the sectors the buyer could be from.
But an investment adviser was more downbeat.
Before the market opened on Friday, Sky said it had received a “highly conditional, non-binding preliminary expression of interest” to acquire all of its shares.
While Sky said there was “no certainty that any transaction will eventuate”, it added that it had engaged with the potential acquirer.
“The latter suggests to us that serious consideration has been given to the offer and discussions are ongoing,” Forsyth Barr analysts Aaron Ibbotson and Matt Montgomerie said.
The pair said they had no information about the potential buyer but Sky was attractive to private equity buyers because its enterprise value to operating earnings valuation was 4.5x, making it one of the lowest-valued stocks on the NZX.
An anticipated free cash flow yield of 10 per cent in FY2025 (which allowed Sky to raise the lure of a doubled dividend by FY2026 at its recent full-year result) would also be a pull for a financial buyer, allowing for a leveraged deal even in a high interest rate environment.
On the other side of the coin, and despite some “structural headwinds”, Sky could be of interest for a strategic buyer “either in Australasia or further afield” because of its uniquely dominant position in the pay-TV market and its rights to most of the key sporting codes, Ibbotson and Montgomerie said.
Sky also had a “high-quality streaming business in Sky Sport Now that could be of interest for global players. The NZ market in general is a good media test bed for global companies operating in the English-speaking world”, the pair said.
Ibbotson and Montgomerie have a $3.00 12-month price target.
“We expect a strong share price reaction as investors’ price in the possibility of a meaningful bid-premium,” they said.
No legs to go through
Earlier, Hamilton Hindin Greene investment adviser Jeremy Sullivan told Market Close that Sky had been a potential takeover target for a number of years.
News of the approach to Sky came from an announcement regarding its share buyback.
“What that tells me is that Sky, whilst obliged to disclose it, does not feel that it has the legs to go through,” Sullivan said.
New box, new structure, new rival
While Sky’s shares have spiked, they are still beneath the $2.90 hit early last year when the company confirmed it was reinstating its dividend.
Sky had an eventful start to 2023, with 170 local roles axed in March as 90 roles in its technology and content operations teams and around 80 in customer care were offshored to India and the Philippines (CEO Sophie Moloney said a net 200 support roles were added, boosting service).
Its new Sky Box and Sky Pod also drew complaints from earlier adopters, but Moloney told Media Insider last week that after a series of software fixes, the rollout was back on track.
Moloney also said if NZ Rugby’s new NZR+ service wanted to show live games, that would impact the price of rights (up for renewal in 2025, with preliminary talks expected to start next year).
In comments over various interviews, Moloney has indicated she’s comfortable with what she calls “co-exclusive” deals for content that could bring down programming costs, with Sky offering viewers the convenience of being a one-stop shop.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
