FAIRFAX Media has held high-level talks with Network Ten about a billion-dollar merger as the third-placed free-to-air broadcaster's future comes into sharp focus.
While sources close to the recent discussions said there was no guarantee Fairfax will make a bid, chief executive Greg Hywood recently met Ten's CEO Hamish McLennan at the Sydney offices of Ten's advisers Citigroup.
It's understood Hywood was accompanied by chief financial officer David Housego and chief information officer Andrew Lam-Po-Tang. The two parties engaged in exploratory talks about a merger, which would create a $2.3 billion group with revenues of $2.5bn.
The meeting took place in the second week of October, days after Fairfax chairman Roger Corbett announced he was planning to step down.
Representatives for Ten declined to comment and a Fairfax spokesman said: "The media industry is a dynamic environment. In that context we meet everybody about everything. At this stage no meeting has any more status than any other." Corbett has lobbied extensively for the relaxation of media regulations to open the door to a merger.
FTA television occupies a privileged position in Australia, with anti-siphoning laws ring-fencing premium sport for the networks.
It still remains the go-to platform for key cultural events, while shiny floor formats and family franchises remain popular even in a disrupted media sector.
Fairfax has grown close to Nine Entertainment Co in recent years. They recently agreed to jointly invest $100 million in a delayed, subscription-based online streaming service dubbed StreamCo.
Any merger with Ten would require Fairfax to offload its radio business and acquire the support of four key shareholders who control about 40 per cent of the stock: mining magnate Gina Rinehart, News Corp non-executive co-chairman Lachlan Murdoch, Crown Resorts chairman James Packer and WIN Corporation owner Bruce Gordon.
The possible move is likely to win approval from Fairfax shareholder Mrs Rinehart, whose company Hancock Prospecting owns 14.99 per cent of Fairfax.
Sources said Mrs Rinehart was enthusiastic about a merger with Ten, in which she owns a 10 per cent stake, arguing that the enlarged entity could exploit the growing online video opportunity.
Ten board director Jack Cowin, who owns Hungry Jack's, is said to be in broadly in favour of the move. He also sits on the board of Fairfax.
To overcome cross-media ownership laws and gain exposure to a commercial TV licence, Fairfax is involved in ongoing discussions with advertising baron John Singleton's Macquarie Radio about a possible sale or merger.
A sharp loss in market share and a plummeting share price has seen Ten linked with a raft of potential suitors in recent months including private equity.
Pay TV operator Foxtel, which is half-owned by News Corp Australia, publisher of The Australian, could take a major stake in Ten.
Any such move would be consistent with a global trend as TV undergoes consolidation. MTV owner Viacom purchased British free-to-air broadcaster Channel 5 this year, and more recently US mogul John Malone's cable operator Liberty Global swooped on British broadcaster ITV.
Despite being restricted by media concentration and ownership laws, Bermuda-based media mogul Mr Gordon could also emerge with a takeover offer if he reduces his ownership of privately held television business WIN Corp, possibly selling to affiliate partner Nine.
Mr Gordon has quietly increased his shareholding in Ten this year to cement his position as the firm's largest shareholder. Under another scenario, Ten could be privatised to allow the owners time to invest in content and rebuild ratings and revenue away from the scrutiny and pressure of being publicly traded.
TEN Price at posting:
20.5¢ Sentiment: Buy Disclosure: Held
