Crikey

Could we be about to see some movement on the Foxtel attempts to buy its Pay TV rival, Austar?

Foxtel has been frustrated in its attempts to buy its rival by the demand from AUN’s biggest shareholder, John Malone’s Liberty Media group, for at least $2 a share. Foxtel, with PBL and Telstra playing hardball, only wants to pay $1.80 a share or so, perhaps $1.85.

But now there’s signs that Malone may be interested in a bid for Virgin media, the UK Pay TV company where Richard Branson is a large minority shareholder with a 10 per cent stake, and wants to keep it.

Virgin Media has received a number of suggested offerings but they were before the latest rattling on financial markets which will kill off any interest from buyout groups for the time being. Raising the $US23 billion for a deal for Virgin Media wouldn’t be a goer in current market conditions for a private equity buyer.

Around 40 similar deals have been delayed or pulled because of growing fears about the safety of bonds and structured credit securities such as CDOs. Reflecting this increased nervousness, the cost of buying credit default bonds (a form of insurance) jumped 20% yesterday alone, (to a cost of half a million US dollars for every $US10 million of bonds).

Even Liberty might struggle, unless Malone could do a deal to take a substantial stake, even just over 50 per cent, much in the way he has his stake in Austar here. He would of course have to deal with the ego-driven Richard Branson, but both would be are united by a dislike for Rupert Murdoch and BSkyB

Virgin Media has huge tax losses, estimated at $YS24 billion, which makes the company attractive.

Malone is big in the US, in parts of continental Europe but not the UK or Germany.
To buy into Virgin Media would see him going head to head with Rupert Murdoch and his 38% owned associate, BSkyB, run by James Murdoch and which last year frustrated a merger deal between Virgin media and the leading free to air commercial TV network in the UK, ITV. Sky is sitting on that 17% stake but is now going to be subjected to a full scale probe on competition grounds, something that might see the ITV stake released by Sky in a settlement.

If Malone is to take on Sky (which he now calls The Death Star, according to interviews in the UK at the weekend), he will need cash.

And that’s what his 53 per cent stake plus stake in Austar represents, just over $A1.1 billion at present prices around $1.61 an Austar share, or closer to $1.3 billion at around $2 a share.