Foxtel has made a conditional takeover offer for Austar (ASX:AUN) worth $2.5 billion including debt, ending months of speculation.
The $1.52 per share bid is currently conditional and non-binding. Austar announced it considers the value “appropriate in the context of a change of control transaction.”
The company plans to work with Foxtel to satisfy the conditions of the proposal so a definitive agreement can be reached.
The deal would also require due diligence, financing and final board approvals.
Foxtel said the merger, if it goes through, would create a company with anticipated revenues of over $2.8 billion and over 2500 full-time equivalent employees.
Ovum analyst, Tim Renowden, said that while the proposed merger is likely to make little difference to consumers, “From a commercial and operational perspective, [it] makes a great deal of sense for Foxtel and Austar.”
Austar's $120 million sale of its wireless spectrum to NBN Co in February also means the deal will have little impact on competition in the Australian telecom market, he said.
The market has long been speculating that Austar's major shareholder, Liberty Global, has finally agreed to the terms of Foxtel's offer.
Liberty Global announced that the offer values Austar at $2.5 billion including net debt of $525 million, an enterprise value of around 10 times the company's consolidated operating cash flow.
Foxtel is 50 per cent-owned by Telstra (ASX:TLS), 25 per cent by News Corp and 25 per cent by Consolidated Media Holdings (ASX:CMJ).
Consolidated Media has disclosed it will fund its contribution to any purchase from a newly-arranged debt facility.
AUN shares jumped 7.91 per cent in Thursday's trading to $1.365, TLS shares grew 0.33 per cent to $3.000, and CMJ rose 2.16 per cent to $2.840.