By Lisa Murray and Kate Askew
JAMES Packer's Publishing & Broadcasting Ltd is selling a half share in its flagship media business to private equity group CVC Capital Partners in a deal which will be announced as early as today.
This will create a cashed-up $5.6 billion media company ready to pounce on other players when changes to media ownership laws come into effect next year.
The new company, PBL Media, will include television network Nine, magazine stable Australian Consolidated Press, PBL's half share in Ninemsn (an internet joint venture with Microsoft), and motoring website carsales.com.au.
It is understood PBL will retain its 25 per cent stake in Foxtel and its 27 per cent stake in fast-growing job website Seek.
The Herald understands PBL Media will have $1.9 billion in equity with debt of $3.7 billion, giving it a market value of more than $5.6 billion. However, PBL has made $4.65 billion out of the deal because it has offloaded all of its debt and picked up $950 million from CVC for its half share.
While the PBL board was signing the deal, the group was busily setting up a host of new companies.
According to Australian Securities and Investments Commission records, seven new companies were registered on Monday. However, the business name PBL Media was registered on October 3, indicating a deal was in the offing at least two weeks ago.
The directorships of the new, private media business are listed in the filings. PBL's existing chief executive, John Alexander, ACP boss Ian Law, and former Optus chief financial officer and now PBL chief operating officer Pat O'Sullivan are common directors of all seven companies.
PBL's legal counsel Guy Jalland is the company secretary for all the new entities.
Each of the companies have one share on issue, which is owned by another of the new companies. The only exception is PBL Media Finance (2), which is owned by Mr O'Sullivan.
The deal will allow the group to privatise Nine and to avoid public scrutiny of its sluggish earnings.
Nine has dragged PBL through a period of negative press with its operational problems and a messy scandal over claims of editorial interference and a blokey culture.
The new, private company will retain the services of those existing managers who have come under fire, including Nine's Eddie McGuire.
ACP's Mr Law will also retain his role as head of magazines. Mr Alexander is expected to be executive chairman of PBL Media.
While his new media strategy was unfolding at home in Australia, Mr Packer was in Singapore yesterday putting the finishing touches to a $US3.5 billion bid as part of a consortium for the Singapore casino Sentosa.
Mr Packer has moved quickly to modify the structure of the media business. It is less than 10 months since his father, Kerry, died and already Mr Packer is showing no qualms in part-selling the sacred cow, the Nine Network.
CVC is in the midst of another drama - attempting to gain the support of the Coles Myer board after it made an offer for the supermarket group as part of a consortium of bidders led by Kohlberg Kravis Roberts.
PBL has been plotting the deal for about two months. It is understood Macquarie Bank first approached PBL but it decided to go with CVC instead. UBS advised PBL on the transaction.
Among the seven new entities is a holding company, PBL Media Holdings. The others are PBL Media Mastheads, PBL Media Finance (1), PBL Media Finance (2), PBL Media Finance Holdings, PBL Media Finance Pty Ltd and PBL Media Holdings Shareholders.
PBL director and former John Fairfax Holdings chief executive Chris Anderson is not a director of any of the seven companies and neither is Mr Packer.
CVC Asia Pacific is a joint venture between CVC Capital Partners and Citigroup. It is understood both the Asian arm and the parent group are in the deal.
PBL is getting around the issue of foreign ownership laws, which are still in place until the Government puts changes into effect early next year, by structuring the deal so that CVC has a synthetic holding in the new company for the time being. When the laws change, the company will be restructured to give CVC a tangible 50 per cent share.