Takeover Speculation Boosts ConsMedia Price

Submitted by Jim Thesiger on 14 August, 2009 - 05:40

The speculation regarding the possibility of Kerry Stokes backed Seven Network (SEV) going for full Consolidated Media Holdings (CMJ) takeover has boosted the price of the company. The talk followed the development which occurred a month back with Kerry Stokes launching a $260 million worth of share raid that surged his holding in the group from 4.8 per cent to 19.9 percent. The incident forced James Packer to go for a share-buying raid on his very own company, buying 2.9 percent to move his stake to 40.8 percent. The speculation is there that Mr. Stokes might consider enlisting the help of an international financial sponsor to finance a full Consolidated Media bid either through cash injection into the listed Seven Network, or by forming a new joint-venture vehicle.

The market is factoring in the possible ConsMedia take over by Seven Network. It is to be mentioned that Consolidated Media has key stakes in Foxtel and Premier Media Group of as much as 25 percent and 50 percent respectively. Yesterday Foxtel declared a sturdy rise in subscribers and operating profit. Since the raid, the shares of Consolidated Media went up from $2.17 to yesterday’s $2.87 which has boosted its market capitalisation to $2 billion from its earlier $1.5 million. Even since Mr. Stokes bought the 10.5 million Consolidated Media shares on mid July, the target has added an additional $131 million in market value, in spite of Seven Network reaching the maximum of what it can buy of the group without going for the complete takeover bid.

According to some experts, the required price for taking over Consolidated Media (which is subjected to Mr. James Packer’s willingness to sell it off) would be $3.50 per share which will capitalise the company at $2.41 billion. The Seven Network is believed to have a cash balance of about $1.1 billion, down from $1.38 billion that the company disclosed last year. Since Mr. Stokes backed Seven Network holds 19.9 percent of the shares of ConsMedia which worth $394 million, it will need an additional $2.02 billion at that level to go for the full takeover.