News Corp and Telstra have announced their intention to combine Foxtel and Fox Sports Australia into a new company.
Subject to the conclusion of definitive agreements, regulatory review and satisfaction of certain other conditions, News Corp will have 65 per cent shareholding in the new company and Telstra will have 35 per cent.
Furthermore, News Corp will be responsible for appoint the chairman and the majority of the new company’s board and senior executives, while Telstra will appoint the remaining directors.
A joint statement by Telstra and News Corp said the new company will be positioned to meet the needs of Australian viewers and create greater choice than ever before by:
- investing in Australian written, produced and directed programming; delivering a wider range of new and innovative products and packages across devices and platforms;
- continuing to invest in premium content and technology to meet growing consumer demand;
- expanding distribution channels for the sale of Foxtel and Fox Sports products; and
- developing greater operating efficiencies across the combined businesses, including distribution.
The proposed arrangements will better position the new company for an initial public offering in the future, with News Corp having a majority stake, according to the statement.
If the transaction between Telstra and News Corp is concluded on the proposed terms, News Corp expects to consolidate the new company into its financial statements.
News Corp CEO Robert Thomson said the proposed restructuring of Foxtel and Fox Sports will unlock value for News Corp shareholders and provide a clearer vision into the depth and strength of our Australian assets.
“The new structure will simplify management control and ensure that the company is best placed to leverage the skills of its talented Australian employees and program-makers,” he said.
“There is no doubt that the world of content is becoming more complicated and competitive, and it is important that Australia has a strong local platform for its great sports and for homegrown creativity, as well as a showcase for international programs.”
Telstra CEO Andy Penn said the transaction would provide the new company with a strong
platform to flexibly respond to significant changes in the media, communications and content markets.
“Our strategically significant investment in the new company will be an important part of Telstra’s media strategy,” he said.
“Under this arrangement Telstra will continue to support the company with our broadcast re-seller arrangements, which is a major strategic component for us.
“More people are watching more media on more devices for more hours every day of the week, so the demand for media and for content is only going to grow.
“With a strong premium content proposition and scale subscriber base, the new company will be well-positioned to deliver a compelling customer experience.”
At this stage, certain key commercial terms of the proposed transaction have been agreed on a non-binding basis.
Telstra and News Corp have signed a binding process agreement under which they will prepare long-form agreements to give legal effect to the commercial principles.
Telstra and News Corp will work to finalise the transaction, including obtaining regulatory approval, to be completed in the first half of 2018.
The announcement comes after News Corp reported a $816.8 million loss for the last financial year, while Telstra’s full year profit plunged by 33 per cent to $3.9 billion.