News Corp and Telstra agree Foxtel-Fox Sports merger

News Corp and Telstra have signed definitive agreements to combine Foxtel and Fox Sports after months of talks.

News Corp and Telstra have signed definitive agreements to combine Foxtel and Fox Sports, effectively clearing away the final hurdle to the combination of Australia’s biggest pay-TV broadcaster with the country’s leading sports programmer.

After months of talks, shareholders on both sides reached an agreement ahead of schedule, paving the way for the formation of a sports and entertainment player with combined annual revenues of $3.4 billion.

Key terms include News Corp holding a 65 per cent shareholding in the combined entity, with Telstra owning the remaining 35 per cent. Currently News Corp and Telstra are joint shareholders in Foxtel. Fox Sports is wholly owned by News.

News Corp, which will consolidate the combined entity into its financial statements, will appoint four directors including the chairman to the company’s board and the senior executives, and Telstra will appoint two directors. The transaction is expected to close during the fourth quarter of financial year 2018.

“The launch of the combined company will mark the dawn of a new era for our Australian business, and Foxtel and Fox Sports Australia will together be a formidable force,” said News Corp chief executive Robert Thomson.

“We will be able to use our powerful media platforms to promote the unique sports and entertainment assets in the two companies, and improve services for consumers and advertisers.”

The deal has already gained approval from the Foreign Investment Review Board and the competition regulator.

Telstra CEO Andy Penn said: “Our customers are streaming more and more sport and entertainment on their TV at home and on their mobile devices while on the move.

“Telstra will be the exclusive telco sales agent for the combined entity on mobile and IP products and we will continue with our broadcast reseller arrangements.”

The deal represents one of News Corp’s biggest strategic moves since Rupert Murdoch split his media empire in 2013, with the global entertainment assets going to 21st Century Fox and the publishing assets, including The Australian, going to News Corp.

It comes amid a bout of industry consolidation as big media companies around the world eye attractive assets to gain greater scale in content and distribution.

Comcast recently said it was planning a $30.9 billion offer for pan-European satellite and cable broadcaster Sky, topping a rival bid from 21st Century Fox, which owns 39 per cent of Sky, to consolidate ownership of the company.

Late last year Disney agreed to buy a group of assets from Fox, including its stake in Sky, for more than $US52 billion. Sky was seen as a strong asset in the deal and a way for Disney to grow its overseas footprint as well as increase its exposure to sports rights.

News and Telstra believe a merger of Foxtel and Fox Sports will enable the enlarged entity to build a valuable content business for the longer term and provide greater differentiation in the market as well as wider monetisation opportunities. Former Fox Sports chief Patrick Delany was installed as the company’s new CEO earlier this year.

News Corp Australasia executive chairman Michael Miller said: “Under the leadership of Patrick Delany, this company will provide the exclusive and quality content that Australian consumers demand and expect. It will broadcast and stream in the most exciting, innovative and engaging ways across all platforms.”