US cable television industry veteran Leo Hindery approached Rupert Murdoch’s News Corp and telecoms giant Telstra with a $US2 billion offer for Foxtel in an unsuccessful attempt to take control of the pay TV operator.
The American businessman, who runs New-York media private equity fund InterMedia Partners, is behind the “blank cheque” company that bid to buy a portion of Foxtel and wipe its debt earlier this year.
Industry sources briefed on the talks who could not speak publicly for confidentiality reasons said the special purpose acquisition company (SPAC), Trine Acquisition Corp, was on the hunt for an Australian media investment. It also briefly considered approaches for Kerry Stokes’ Seven West Media and Nine Entertainment Co – the owner of this masthead. However, Foxtel was the only one to receive an offer.
It is unclear why Trine was turned away by Telstra and News Corp because a successful transaction could have provided the debt-ridden pay TV company with some much needed financial relief. The proposal also would have left News Corp with a 30 per cent stake in Foxtel, but Trine would have wiped out Telstra’s shareholding entirely.
A spokesman for Trine declined to comment. Foxtel declined to comment. Telstra declined to comment.
A SPAC is a publicly traded company that is made up with cash raised by investors and typically acquires or invests in unlisted companies. After an unsuccessful attempt to buy Foxtel, Trine invested in a manufacturer called Desktop Metal, which creates metal 3D printing technology.
Mr Hindery formed Trine in March last year after decades of working in the media and telco industry. He was the founder of InterMedia Partners, a private equity firm focused on media industry investment. He also led Tele-Communications, a major US cable company that merged with AT&T in 1999 in a $US48 billion deal and The YES Network, a regional sports network, which is home to the New York Yankees. Mr Hindery raised about $US261 million in Trine’s initial public offering and intended to buy a company in the media or tech space.
News Corporation wrote down the value of Foxtel by $1.4 billion last May and Telstra wrote off its shareholding by $300 million. Foxtel’s total value is now $1.3 billion. News Australia Holdings (the parent company of News Corp) divested its subscription services segments on July 2 this year and presented it as an “asset held for sale”. Sources previously said News Corp was considering the offer at the time.
Chief executive Robert Thomson said in September that the company had simplified its structure.
“All companies, particularly those of pedigree and providence, have complicated structures which may sometimes limit their flexibility and stifle simplicity,” Mr Thomson said. “So in fiscal 2020, we completed a corporate restructuring in Australia to simplify that structure, which had over the years developed complex intercompany relationships. So now we have aligned with all of our segments – Digital real estate, subscription video services and publishing,” he said.
Foxtel, which is 65 per cent owned by News Corp and 35 per cent owned by Telstra, has been under pressure in recent years due to the rise of offshore streaming services such as Netflix and Amazon Prime.
The once-dominant pay TV company has drastically cut costs in recent months and launching its own streaming products such as Kayo Sports and Binge in an attempt to reach new subscribers. The coronavirus pandemic added to these pressures and led to Foxtel standing down more than 200 staff and axing more than 300 jobs earlier this year.
But the company was challenged well before the pandemic. It was trying to raise billions of dollars in debt in May last year in an attempt to roll over existing loans, but an inability to do so resulted in a $300 million lifeline from News Corp. According to News Corp’s most recent financial statements, Foxtel had US$965 million ($1.3 billion) in debt, excluding related party loans.
Mr Thomson said last month there was no need to inject more cash into Foxtel. “We foresee no need to bolster Foxtel with extra investment, which shows that the business is on a particularly positive trajectory,” he said.
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