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INL takeover offer gets the bum's rush

By Duncan Bridgeman

Friday 31st October 2003

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Sky Television subscribers will have to go without their CNBC Asia channel from next month but the company's shareholders might be less willing to part with their shares.

An independent report from Deloitte Corporate Finance, released after the Sky annual meeting this week, rejected a takeover offer by majority shareholder Independent Newspapers, saying it was not fair to minority shareholders.

INL has offered $3.35 cash for each Sky share plus three of its own shares for every 10 Sky shares.

The Deloitte assessment, which mirrors that of Sky's own independent directors, puts the full underlying value of Sky in the range of $5.03 to $5.61 a share.

Deloitte's valuation of the INL offer was between $4.61 to $4.87 a Sky share.

Shares in Sky TV, 78% owned by INL after the second largest shareholder Telecom accepted the offer, flipped back over $5 after the report was released.

Deloitte also noted that if INL acquired 100% of Sky then each Sky shareholder's interest in sky would be diluted by 75%.

Sky TV, which has a virtual pay-TV monopoly in New Zealand, this week reiterated its profit forecast of between $28 million and $25 million this year.

Shareholders were surprisingly quiet at the annual meeting in Auckland on Wednesday, given INL's unconditional offer, which is scheduled to close on December 5.

Chief executive John Fellet could not make any direct comments on the takeover but did not rule out a revised offer from INL. As part of its agreement with Telecom, INL said it would not raise its offer for sky in the year following the announcement.

"I guess everything is up for negotiation," Mr Fellet told The National Business Review.

"What the independent directors have done is tried to represent the views of minority shareholders ... I'm just one of the slaves that gets sold with the plantation," he said after the meeting.

Sky TV remained upbeat about its future performance, citing improvements in the number of viewer hours and churn rates continuing at record lows, despite the Rugby World Cup broadcast free-to-air by state-owned TVNZ.

Mr Fellet said he regretted the loss of the CNBC channel but there was not enough core support in New Zealand to keep it running. He said the company had received about 20 letters of complaint.

The company was looking at offering subscribers the option of paying extra to install a 3m dish that would give access to the channel, he said.

Sky will launch three new channels by Christmas, including UKTV, History Channel and Disney Channel.

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


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