It's difficult to decide which is more surprising: the revelation that someone put together a $US2 billion-plus bid for Foxtel; or that its two heavyweight shareholders rejected it.
This week, media reporter Zoe Samios broke the news that a "blank cheque" investment vehicle led by US cable industry veteran Leo Hindery approached Rupert Murdoch's News Corp and the telecommunications behemoth Telstra with a takeover offer for the under pressure pay TV operator.
Competition in the streaming video market has intensified. Credit:Sam Mooy
Foxtel is undergoing the kind of painful, wrenching transition many companies have experienced in the age of digital disruption. It is adjusting from being a dominant monopoly provider to competing in an increasingly crowded subscription video market.
It has been losing subscribers from its traditional (and more expensive) product while growing out its new internet streaming services. During the coronavirus pandemic it has shed about 600 jobs and pulled back spending on non-core sports rights.
Of course, Foxtel's challenges predate the pandemic. Last May, News Corp slashed the value of its 65 per cent holding on its books by nearly $US1 billion; Telstra also wrote-down its stake by $300 million.
As recently as last year, both of Foxtel's owners were openly talking about floating the business on the stockmarket, a move that would have allowed each to reduce their shareholdings. That plan was seemingly shelved as Foxtel's financial position deteriorated.
But the asset still piqued the interest of at least one potential suitor this year, and that in theory could have provided Telstra and News with another exit avenue.
News Corp global chief Robert Thomson has ruled out putting more money into Foxtel.
The structure of the offer (which was rejected) remains unclear. And Hindery's special purpose acquisition vehicle (SPAC), Trine Investment Corp, only raised $US261 million.
A SPAC is a listed company set up with the express intention of acquiring another unlisted company, giving sharemarket investors the ability to participate in private equity style upside. There has been an extraordinary boom in SPAC issuance in the US, with around $US40 billion raised through the vehicles this year. It was only a matter of time before one of them had a look at opportunities in Australia.
There are still lingering concerns among investors that News may eventually have to tip more money into Foxtel – even though chief executive Robert Thomson recently ruled that out – and many would prefer the company to focus on its better performing operations such as The Wall Street Journal and REA Group.
Evidently, the Foxtel proposal was not compelling enough for News Corp or Telstra. In any case, it adds to the long running intrigue about the once-dominant pay TV provider at a corporate and strategic level.
Similar forces that have underpinned the explosion of SPAC issuance in the US – low interest rates, buoyant equity markets – have contributed to a boom in IPOs on the ASX during the coronavirus pandemic.
Analysts at EY in September predicted $3 billion in capital could be raised this year through ASX floats, and we are well along the way towards achieving that goal.
This week, forensic data analytics provider Nuix floated on the ASX, the biggest business to land on the boards this year. The deal is significant on a number of levels – it is a billion-dollar company with an impressive client list that includes the FBI and AFP, and as Colin Kruger outlines in this week's cover feature, a fascinating backstory. Investment banking powerhouse Macquarie is also set to make a killing from the deal.
Nuix CEO Rod Vawdrey at the bell ringing ceremony at the ASX. Nuix soared on its debut on Friday. Credit:Ben Rushton
Yet, as heartening as it is to see a company like Nuix make it to the ASX there are still reasons to be cautious about this IPO boom. It could be viewed as a classic contrarian signal – if a lot of business founders think now is a good time to cash in on their companies, does that imply that conditions might not be as good in the near future? In Australia, the economy and markets will be tested next year when government measures to combat the pandemic such as JobKeeper are withdrawn.
Sarah Danckert this week also uncovered fresh details about Liberty Financial, which is in the process of conducting one of the most eagerly anticipated IPOs of the year. The company bills itself as the nation's 10th largest non-bank lender and boasts an $11.5 billion loan portfolio. But questions are now being asked about its failure to disclose related party loans and key legal matters in its prospectus.
China tensions simmer
Tensions between Australia and its largest trading partner China remain at fever pitch levels.
This week, the listed company that has arguably been hit the hardest by China's trade strike – Penfolds maker Treasury Wine Estates – outlined its plans to diversify away from what is currently its biggest market. Whether demand for Australian wine in places such as the United States, Europe and southeast Asia can pick up the slack from China remains the key question.
China may be deeply upset with Australia, but there are still no signs iron ore exports will be targeted. Prices of the key steelmaking ingredient and the nation's most lucrative export hit seven-year highs on Thursday.
It lifted shares of Fortescue Metals to record levels, while the likes of Rio Tinto and BHP also posted substantial mid-week gains.
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