Australia | Dec 08 2006
By Greg Peel
The media reform scramble has to date been all about sneaky minority acquisitions or major pre-emptory strikes. As a result, media stocks have been inflated to prices beyond levels they’d been inflated to already. However, CanWest has taken a different tack, and announced it’s looking for buyers for its 56.5% stake in Network Ten (TEN).
Is this because poor old Ten has been a wallflower to date while Nine has been snapped up and Seven’s (SEV) been doing some snapping? One thing is certain and that’s CanWest is unlikely to attract a substantial premium now it’s made the first move.
Ten was always a takeover target by virtue of being one of the three national free-to-air television networks, but as the poorest performer of the three, it may have been considered a bit of a booby prize. Or it may have yet been considered the best bet, given its performance has not matched those of its competitors in recent times.
While optimism abounds at Ten that things can only get better – ratings are improving and ad spend looks like bouncing back – management has to date been glacial in response to the new media revolution. This revolution has seen Nine hook up with Microsoft and Seven with Yahoo!, amongst other new media associations.
In announcing a poor first quarter result, Ten also announced its plans to form a digital strategy. This move has all the spontaneity of a fixed-line phone company deciding it might be time to look into this new-fangled mobile phone thingy. It’s at least a step in the right direction, but as Merrill Lynch points out, Ten will have a tough time competing with ninemsn and Yahoo!7 given those groups’ expedient development of magazine, music, IPTV, email, instant messaging and voice telephony service cross-fertilisation strategies.
Twenty-first century considerations aside, Ten is seen as potential jewel for media consolidation as a pure-play FTA TV addition to any expanding media concern. Otherwise, it has little else going for it. Speculation to date has centred on a possible snatch by News Corp (NWS). Either way, Ten has been swept along in the media stock re-rating of the last few months.
Unjustifiably so, think some brokers. Sure, it’s a target, but if it wasn’t for media reform opportunities the Ten share price would be substantially lower in many an analyst’s opinion. There was also the problem that CanWest’s majority holding through convertible debentures added a deal of uncertainty for anyone thinking about taking a swing.
Until now. The main reason CanWest has gone to market rather than waiting for suitors to come a-calling is to overcome this uncertainty barrier. A caveat to a CanWest sale is that any suitor has to make an equivalent bid for all of Ten.
So it’s game on, but analysts warn shareholders not to get excited about the possibility of a nice fat premium, as has been the case for the likes of Nine (PBL), Southern Cross (SBC) and Fairfax (FXJ). Ten is only attractive at the right price, and analysts tend to think the premium ascribed to Ten by the market in anticipation is already too much.