Austar United Communications

By Dan Stratful

Wednesday 8th February 2012

Austar United Communications (ASX: AUN) has entered an agreement with its controlling shareholder Liberty Global and FOXTEL, for FOXTEL to acquire AUN for $1.52 per share.

AUN provides subscription satellite TV services in regional and rural Australia, with more than 750,000 subscribers. AUN is also a significant provider of programming in the Australian television market through its 50% owned joint venture, XYZnetworks.

The acquisition of AUN is conditional on approval from the Australian Competition and Consumer Commission (ACCC), and having received approval from the Foreign Investment Review Board, FOXTEL now needs to gain approval from the ACCC for the deal to go through.

While AUN makes an interesting arbitrage opportunity for those interested in buying the shares at $1.21 and collecting $1.52 if the deal is approved, there is also significant downside if the deal does not go through.

AUN is trading well above fundamental valuation and is trading on a hefty takeover premium.

The ACCC in its ruling will be looking at whether the acquisition will significantly reduce competition within the subscription TV industry, and as it is difficult to know which way the ACCC will rule.

Cautious investors who are happy with the spike in the share price may like to consider SELLING their shares and avoid the risk that the deal falls through.

Those who are optimistic that the deal will be approved should continue to HOLD for the $1.52 per share.

Discussions between FOXTEL and the ACCC continue.

Status: HOLD

AUN’s shares today traded at $1.21

For portfolio, sharemarket and fixed income enquires contact:
Dan Stratful at Investment Research Group (IRG)
Authorised Financial Adviser (AFA)
0800 437 8489, 09 304 0232, dan.stratful@irg.co.nz
**A disclosure statement is available, on request and free of charge.

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