Ten worries eased as Foxtel buys 15% stake

Network Ten’s long search for a new financial investor led to Australian pay TV operator Foxtel acquiring a 15% stake in the Sydney-based broadcaster.

Foxtel is investing up to A$77 million (US$59.5 million) in 513.3 million ordinary shares at A$0.15 a share for a stake in the free TV business.

An agreement has been mooted in some form since Ten announced a strategic review last November in order to generate new cash.

Foxtel initially partnered with Discovery Communications on a full company buyout, but this move failed after existing shareholder Bruce Gordon objected.

Ten today announced the agreement would create up to A$154 million in new capital that “reduces debt and creates financial flexibility”.

Though placing new shares with Foxtel will dilute Ten’s share price, the broadcaster claimed this was “more than offset by expected benefits from strategic arrangements”.

News Corp- and Telstra-owned Foxtel cannot increase its stake beyond 15% due to its interests in the local pay TV market, though it will have a representative on a sized-down six-person board at Ten.

An interesting facet of the deal sees Ten given the option to become an equity partner in SVOD service Presto, which Foxtel operates with bitter Ten rival Seven.

The deal will also see Ten become a 24.99% owner in Foxtel-backed ad sales firm MCN, which is appointed sales representative of Ten’s television and digital inventory. This part of the agreement commences immediately, while the rest of the deal requires regulatory clearance.

Ten plans to use proceeds from the new share issue – which will be extended on a pro-rata basis to its existing majority shareholders such as Hancock, CPH and Illyria – to repay amounts from an existing A$200 million CBA facility, with the excess retained as cash.

Regulatory approval is expected some time between now and September, with Foxtel officially taking its 15% stake in October.

Ten had been grappling with ways to create new capital after running into financial trouble.

Though it has struggled in the ratings war with Seven and Network Nine in recent years, the broadcaster said today to date 2015 had been its best performing year since 2012, and pointed to OzTam data confirming it has the only local commercial free-to-air to grow this year.

In particular, MasterChef’s recent resurgence has continued with an average 1.12 million average capital city audience. I’m a Celebrity… Get Me Out Of Here, Shark Tank and Gogglebox Australia were also singled out as driving ratings.