In February the bondholders in UnitedGlobalCom (UGC) will have to vote if they are willing to sell their rights to Castle Harlan Australian Mezzanine Partners (CHAMP). CHAMP has four Brussels based companies, which are working on the purchase of UGC.
An analysis of this deals looks as follows:
CHAMP will acquire 51% of Austar (63.2% of United Austar’s 80.7% share) if the deal that is currently on the table gets the go ahead.
CHAMP will pay $US 34,500,000 ($A 61 million or 0.17 cents per share) for the 51% stake.
CHAMP will then seek to acquire the publicly listed shares (19.3% ) at $A0.17. (If the same pro rata share with UA is maintained in that acquisition CHAMP will acquire a further 12.2% of Austar.
CHAMP would then own 63.2% of a delisted / privatised Austar with UA owning the other 36.8%.
The total cost to CHAMP of the 63.2% stake at the offer price will be $USD 42,752,941 ($A 76,543,000) valuing Austar at $A 121 million.
Champ will get the deal for a paltry 17 cents Australian a share, well below the $8+ that some paid for those shares to buy themselves in. In all it will cost them $A 61 million. Not a bad deal.
UGC is controlled by billionaire US cable mogul John Malone, a business associate of Rupert Murdoch and shareholder in News Corp.
Castle Harlan is a New York based venture capitalist that partnered in Australia with Australian Mezzanine Finance to form Castle Harlan Australian Mezzanine Partners (CHAMP). The Australian principals of CHAMP (formerly Australian Mezzanine) are Bill Ferris and Joe Skryznski. Joe Skrzyinski is a long time friend and former business partner of Kim Williams (CEO of Foxtel). Joe and Kim put together the Pay TV package for David Hill and the ABC back in the early 1990′s. Australian Mezzanine Finance was to raise the $40 million to finance that business (which eventually folded when Brian Johns took over the ABC from David Hill).
Austar is the last "independent" Pay TV player in Australia and the only potential competitor to Foxtel now that the ACCC has sanctioned the Foxtel / Optus deal. As I have indicated at several occasions I predict that Optus will exit cable TV business within the next few years.
Austar gets the majority of its key programming from Foxtel. It also has "exclusive” arrangements with Foxtel in its non-metro areas and a "no compete" agreement in the metro areas. These agreements carried over from the Australis/Galaxy days and were a pay off for Austar supporting Foxtel in convincing the Hollywood studios to renege on their supply agreements with Australis.
A legacy of the Austar/Australis deals is that Austar pays Foxtel less than Foxtel pays the Hollywood studios for its movies! That means that every time Austar signs a new subscriber Foxtel loses money.
Clearly that is a deal that Murdoch must eventually buy back.
For more information see:
United Pan-Europe Communications (UPC)
Australia – Pay TV – Historical Analysis – 1998-Present
Australia – Pay TV – Historical Analysis – 1994-1997
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