Tax ruling clears way for PBL split

JAMES Packer's Publishing and Broadcasting Ltd is expected within days to start dispatching to shareholders the public documents detailing its landmark split into separately listed media and gaming companies, after overcoming the final major obstacle to the carve-up through negotiations with the Australian Taxation Office.

JAMES Packer's Publishing and Broadcasting Ltd is expected within days to start dispatching to shareholders the public documents detailing its landmark split into separately listed media and gaming companies, after overcoming the final major obstacle to the carve-up through negotiations with the Australian Taxation Office.

Under the terms of the PBL split, first foreshadowed in The Australian in May, it was revealed that investors would receive a cash consideration of $3 for each PBL share they held. It is now understood this $3 cash payment will be treated as capital, meaning that for many - but not all - PBL investors the payment will be tax-free.

Informed sources said yesterday that under the terms of an ATO ruling issued to PBL, the tax status of how the payment should be treated by individual shareholders will depend on a number of factors, including their individual tax bracket and their cost base.

This is understood to be a favourable outcome for the biggest beneficiary of the cash payout, Mr Packer's private company Consolidated Press Holdings, which holds 261.5 million shares in PBL, and now stands to receive a tax-advantaged $784.5 million from the payment.

There had been several delays in the split process, which PBL acknowledged were because of the ongoing discussions with theATO.

The shareholder documents, detailing the scheme of arrangement to be put to a November shareholder meeting at Melbourne's Crown casino, will map out PBL's split into Consolidated Media Holdings (CMH) and gaming group Crown.

They are expected to include significant information about some of CMH's investments, including its 50 per cent holding in Fox Sports, 27 per cent of online jobs site Seek and a 25per cent stake in pay-TV operator Foxtel.

It is understood the documents will show CMH is debt-free, with dividends from the increasingly profitable Foxtel, Fox Sports and Seek providing the listed media company with any cash it needs to make acquisitions.

It was revealed in The Australian last week that Foxtel had underlined its growing financial muscle by preparing to deliver to its owners their first significant capital return of $200million, with PBL believed to have received a cash payment of $50million out of this figure.

With assets such as Foxtel finally paying dividends, PBL has recently begun displaying an appetite for "new media" acquisitions.

The company joined forces with Macquarie Bank to try to buy a controlling two-thirds interest in Germany's leading real estate website, Immobilien Scout, for $580 million, but the parties were gazumped last month by a last-minute "right of last refusal" bid by Deutsche Telekom.

Informed sources said PBL now wants to have the split, including final court approvals, "wrapped up by late November". The demerger is set to lead to radical change at PBL, including big-scale staff cuts in the media side of the PBL empire.

Details disclosed to an analysts-only meeting in August gave a glimpse into the contrasting fates of CMH and Crown. PBL chief executive John Alexander disclosed that if the scheme is approved, CMH would become a "genuine holding company", with 12 directors and just 10 full-time employees.

"It must be the only public company I know of that has more directors than employees," he joked.

Mr Alexander also revealed that CMH would not receive any proceeds from the recent halving of PBL's stake in PBL Media - which owns the Nine Network and ACP Magazines - from 50 per cent to 25 per cent.

By contrast, following the split the majority of PBL's cash reserves will reside with Crown.