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INL shares suspended

Friday 11th April 2003

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Independent Newspapers Limited is in discussions with John Fairfax Holdings Limited about the possible sale of INL's New Zealand publishing business.

The New Zealand Stock Exchange has been asked to suspend trading in INL shares for two trading days.

It is expected that a further announcement will be made before opening of trading on 15 April 2003 and that trading will resume on that day.

Fairfax's flagship mastheads include the Sydney Morning Herald, Melbourne Age and Australian Financial Review.

INL owns nine daily papers in New Zealand, including Wellington's Dominion Post and Christchurch Press; one Australian daily; New Zealand's two Sunday papers; the Stuff website; the TV Guide; and a range of national magazines including New Zealand House and Garden.

It also owns 66 percent of pay-TV operator Sky Network Television.

Mr Murdoch is in the midst of building a global satellite TV empire.

After years of unsuccessful attempts, he finally struck a deal this week for the final piece of his global satellite TV empire.

News Corp has agreed to pay $US6.6 billion ($NZ12.2 billion) for the purchase of 34 percent of Hughes Electronics from General Motors, filling a huge hole in Murdoch's satellite TV empire.

Hughes owns DirecTV, America's leading satellite pay-TV broadcaster with 11 million subscribers.

If today's deal is passed by US regulators, Mr Murdoch will have DirecTV covering the US market, British Sky Broadcasting in the UK (6.1 million subscribers), Star (300 million subscribers in Asia and the Middle-East), Foxtel in Australia (790,000 subscribers), Sky Brasil (700,000 subscribers in Brazil), Sky Mexico (690,000 subscribers in Mexico) and a controlling stake in Sky TV in New Zealand.

A spokeswoman for INL said the company would not be commenting further until Sunday, or more probably Monday.

She said the board had yet to meet to consider the proposal.

Fairfax has long been tipped as tying up with Wilson & Horton, publisher of the New Zealand Herald and nine provinical dailies. However, brokers said it was an equally good fit with INL.

Sky TV shares shot up 32 cents today to $4.00 in expectation that the residual INL company would make a full takeover bid for Sky.

One analyst, who did not wish to be identified, said it was clear Mr Murdoch was progressively getting out of the print business and concentrating on satellite TV.

He needed to free money from what has become a peripheral investment.

"It's too small for News Corp to worry about," he said.

But Sky TV was intergral to the News Corp satellite TV empire.

He said the original deal was going to be News selling INL to Fairfax, with Fairfax agreeing to sell the 65 percent stake in Sky to News, which would simultaneously also launch a full takeover for Sky.

There was still a chance that News makes a full takeover bid for INL prior to selling the newspaper operation, although the analyst doubted that scenario. He said that without a full takeover of INL, News could have some trouble with minority shareholders.

One that is likely to be fully behind News is Telecom, which owns 12 percent of INL, and is really only interested in the Sky operations. It also owns 10 percent of Sky.

Fairfax has wanted to expand in New Zealand and would be able to bring huge expertise to the INL newspaper group, the analyst said.

He said his firm put a $4.10/share valuation on INL which would value the company at $1.7 billion.

He valued Sky at $4.40/share which would value it at around the same price as INL. That would mean INL's newspaper operations would be valued at around $600 million.

Independent News & Media plc boss Sir Tony O'Reilly has long eyed the Fairfax group, most recently in conjunction with international financier George Soros.

In October, London's Sunday Times speculated that Mr Soros was considering an investment in Independent and the pair had discussed bidding for Fairfax.

Independent owns 45 percent of APN News & Media, which in turns owns Wilson & Horton, owner of The New Zealand Herald and other New Zealand provincial papers.

Mr O'Reilly has been thwarted in his desire to control Fairfax by Australia's limits on foreign ownership of media, something the government there is considering relaxing. However, it is believed he also considered the Fairfax price too high.

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


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