Rupert Murdoch’s 21st Century Fox will be the biggest loser from CBS Corporation’s takeover of Network Ten, as it stands to receive a relative pittance from its once-lucrative output deal with the broadcaster.
In a report to creditors, administrators KordaMentha said they hope to work with Fox to renegotiate its long-running content agreement. But if negotiations fail, Fox will receive just $3.4 million.
Fox initially claimed it was owed as much as $450 million but that was bargained down to $200 million on the basis that Fox could sell much of its programming to other buyers if the contract with Ten was terminated.
While Fox may well be displeased at a prospect of such a small pay-out, CBS holds the whip hand as Ten’s biggest single creditor, owed $360 million.
CBS has agreed to pay most creditors in full, including key content suppliers such as Endemol Shine Australia, ITV Studios Australia and FremantleMedia Australia, providing they agree to continue supplying programming to Ten.
KordaMentha told creditors the proposed deed of company arrangement (DOCA) enabled the business to continue and maximised the return to creditors. The creditors will meet on September 12 to vote on the offer and DOCA.
Last Friday CBS paid out $143 million to the secured creditors, principally Commonwealth Bank of Australia and billionaire shareholders Bruce Gordon, Lachlan Murdoch and James Packer, who were loan guarantors.
The US studio also agreed to put up a $30 million facility to support Ten’s operations until the DOCA is implemented.
The report reveals CBS has agreed to forgo any return from its claim over the money owed from its output deal and to pay a further $205 million for the Ten group and its creditors.
Among the other creditors who will be paid in full are employees and general trade creditors.
Rebutting allegations from disgruntled shareholders, the report added investigations had not identified any improper conduct in the lead-up to the appointment of KordaMentha in June and the company was not insolvent until June 13.
The deal is subject to clearance from the Foreign Investment Review Board (FIRB), after which court approval will then be needed to transfer Ten’s shares to CBS.
Ten’s shareholders will get nothing. When trading in Ten’s stock was suspended in June, shares were worth 16 cents, valuing the company at $59.1 million.
If the transaction proceeds as planned, subject to FIRB approval, Ten could be in CBS’s hands by mid-October.
CBS assured the administrators there will be no redundancies, which suggests the management team led by CEO Paul Anderson will continue to run the business.