Two Australian media moguls have lost a court challenge to CBS Corp’s planned buyout of bankrupt television broadcaster Ten Network Holdings Ltd, giving the U.S. media giant a strong upper hand ahead of a creditor vote on Tuesday.
CBS, Ten’s biggest creditor, swooped on the TV station after it went into administration three months ago, upending acquisition plans by Twenty-First Century Fox Executive Chairman Lachlan Murdoch and business partner Bruce Gordon that had been on hold as they awaited reforms to media ownership laws.
The two magnates put in a sweetened offer to counter CBS’ A$201.1 million ($160 million) bid on Friday after the Australian Senate voted to relax ownership rules.
But they appear to be very much on the back foot after an Australian judge on Monday rejected arguments that Ten’s administrator, KordaMentha, had mishandled the sale to CBS by not providing sufficient information to creditors about why the CBS deal had been preferred.
Justice Ashley Black also said in his ruling for the New South Wales Supreme Court that the U.S. firm should not be blocked from voting at the creditor meeting as to do so would discourage creditors from rescuing viable firms.
“For these reasons [the case] should be dismissed,” he said.
While Gordon plans to appeal that decision, according to a report by Sky News, CBS appears to be in a formidable position ahead of the meeting on Tuesday which will vote on whether to accept the CBS deal or to consider the revised Murdoch/Gordon bid.
Representatives for Gordon and Murdoch were not immediately available for comment. CBS declined to comment.
To clinch a deal, CBS which wants a stronger foothold in Australia where it plans to launch its streaming service, must secure majority support from creditors in both value terms and by number.
It will easily win in value terms as the U.S. network is owed more than half of Ten’s A$609.1 million in debt. And while the total value of the Murdoch/Gordon bid has not been disclosed, figures for cash owed to creditors have been released and some creditors would still be better off under the CBS deal.
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By number, hundreds of Ten employees owed pension and leave entitlements, are likely to have a decisive vote. One Ten employee told Reuters that “there’s a fairly strong view supporting the CBS arrangement among the staff.”
The employee, who was not authorised to speak on the matter and declined to be identified, said many staff members feared there would be more consolidation under Murdoch with other media assets, leading to more job losses.
Although a ratings laggard, Ten’s national reach and strong brand recognition in the world’s 12th-largest economy have made it an attractive buyout target.
Murdoch and Gordon, which together own about a fifth of Ten’s shares through their private companies, are widely viewed to have accidentally shot themselves in the foot when they withdrew a debt guarantee in June and tipped the broadcaster in to bankruptcy.
That was seen as a manoeuvre to release Ten from expensive licensing contracts with U.S. studios such as CBS before the magnates followed up with a takeover offer, but instead it allowed the U.S. network to jump in with a bid.
Even so, the magnates could mount further legal challenges.
“It’s 1-0 to KordaMentha at the moment, but…Murdoch is desperate to get this, not only for financial reasons but for loss of face reasons…I think they really want it,” said independent media analyst Peter Cox.