Australia based TEN Network has announced a $154 million capital raising that will see new shares issued at 15 cents per share, a more than 40 % discount below their current price.
Foxtel will take up half of the raising and will emerge with a roughly 15 % stake in the company, with the remainder of the money to come from Ten shareholders. As a result of this deal, a Foxtel representative will join the Board of Ten, which will be reduced in size to six directors.
IG market strategist Evan Lucas described the $77 million price tag Foxtel will pay for the stake as “opportunistic” given the broadcaster’s troubles.
“It’s a very good price from Foxtel’s perspective, its a lot cheaper than what was expected,” he said.
Ten has suffered years of declining ratings and advertising revenue, despite funding injections from its list of heavyweight shareholders, which include Gina Rinehart, James Packer and Lachlan Murdoch.
But its ratings performance appears to have turned a corner this year, with the main station’s prime time audience share up 18 %, thanks to successes like I’m A celebrity Get Me Out of Here and Family Feud.
As part of the deal, Ten will take a 24.99 % stake in Foxtel’s advertising business, Multi Channel Network, which will also become a sales representative for the free to air broadcaster.
Ten will also have to option to become a 10 % shareholder in Foxtel’s online streaming venture Presto within two years.
Chief executive Hamish McLennan said the new arrangements would better allow Ten to compete for ratings and advertising in an increasingly fragmented market.
“The board believes the agreements with Foxtel and MCN will materially enhance Ten’s business and better equip it to respond to the challenges of the ever-changing media and advertising landscape,” he said.
Mr McLennan said Ten’s prime time audience share had increased 18 % on its main channel so far this year.
FatProphets chief executive Angus Geddes said the deal was a long time coming, given that Ten had opened itself to potential takeover offers in later 2014.
Foxtel and US cable giant Discovery last year put forward a 23 cents a share takeover offer for Ten but the deal ran into staunch opposition from Ten’s biggest shareholder, WIN TV owner Bruce Gordon.
“It’s taken some time for a deal to be done at Ten, this has been going on for six months so from the market’s point of view its probably good that there’s been some closure,” Mr Geddes said.