11 July 2011
Company Announcements Office Australian Securities Exchange Limited Exchange Centre 20 Bridge Street Sydney NSW 2000
Dear Sir or Madam
AUSTAR UNITED COMMUNICATIONS LTD (AUN):
Please find attached an announcement from AUSTAR confirming that today it has entered into definitive transaction agreements with Liberty Global, Inc. (LGI) and FOXTEL Management Pty Limited (FOXTEL) under which FOXTEL will acquire 100% of AUSTAR.
Yours faithfully
Deanne Weir Company Secretary
For personal use only use personal For
News Release 11 July 2011
AUSTAR ANNOUNCES DEFINITIVE TRANSACTION FOXTEL TO ACQUIRE AUSTAR FOR $1.52 PER SHARE
AUSTAR United Communications Limited (AUSTAR) announced today that it has entered into definitive transaction agreements with Liberty Global, Inc. (LGI) and FOXTEL Management Pty Limited (FOXTEL) under which FOXTEL will acquire AUSTAR by a series of transactions including a scheme of arrangement (Scheme).
As previously announced on 26 May 2011, following the receipt of an indicative, non‐binding and conditional proposal from FOXTEL, the Board of AUSTAR determined that it was in the best interests of AUSTAR shareholders that AUSTAR work with FOXTEL to satisfy the conditions upon which that proposal was made, including due diligence, financing and final board approvals. Those conditions have now been satisfied and the parties have entered into definitive transaction agreements.
Under the terms of the proposed transaction, all AUSTAR shareholders will receive $1.52 in cash per share, which values AUSTAR at an Enterprise Value of approximately $2.5 billion.
The cash payment of $1.52 per share represents:
a 54% premium to the closing price of A$0.985 on 17 February 2011, being the last trading day prior to AUSTAR’s share price being affected by media speculation about a proposed transaction (Reference Date); a 56% premium to the 1 month volume weighted average share price to the Reference Date; and approximately 10x Operating Cash Flows(1) for the last 12 months.
The Independent Directors of AUSTAR unanimously recommend that AUSTAR minority shareholders vote in favour of the Scheme and associated shareholder resolutions, in the absence of a superior proposal and subject to an independent expert concluding that the Scheme is in the best interests of AUSTAR minority shareholders. Each Independent Director intends to vote all AUSTAR shares that he holds or that are held on his behalf in favour of the Scheme and associated shareholder resolutions.
The Scheme is subject to a number of conditions including: (i) ACCC and FIRB approval; (ii) an independent expert determining that the Scheme is in the best interest of AUSTAR minority shareholders; (iii) AUSTAR shareholder and court approvals; (iv) the receipt of an IRS ruling by LGI confirming LGI’s intended treatment of the transaction; and (v) other customary For personal use only use personal For conditions for a transaction of this nature. Key terms of the Implementation Deed are outlined below. The full terms of the Implementation Deed, and associated transaction documentation, are expected to be released to the market shortly as part of FOXTEL’s substantial shareholding notice.
In order to implement the Scheme, a majority in number of the AUSTAR minority shareholders voting, and who represent at least 75% of the votes cast, must approve the Scheme at the scheme meeting.
Mike Fries, Chairman of AUSTAR and Chief Executive Officer of LGI said: “AUSTAR is a world class company and LGI is proud to have been part of its development and growth over the last 17 years. John Porter and his team have built one of the best pay TV platforms in the world and this deal is a natural next step for AUSTAR and its subscribers. We look forward to completing the transaction and believe it represents compelling value for all shareholders.”
Mr Timothy Downing, Deputy Chairman of AUSTAR, said: “The Independent Directors of AUSTAR believe the proposed transaction is in the best interests of all shareholders. Subject to confirmation from an independent expert that the Scheme is in the best interest of shareholders and there being no superior proposal we unanimously recommend that minority shareholders vote in favour of the Scheme and associated shareholder resolutions. In the interim we remain fully committed to our customers, suppliers and employees and look forward to working with FOXTEL management to ensure a smooth transition if the Scheme is implemented.”
Transaction Structure The proposed acquisition of AUSTAR by FOXTEL will be accomplished through a series of transactions as follows: First, all of the shares in AUSTAR that LGI does not already control will be acquired by a new, wholly‐owned subsidiary of LGI through an AUSTAR scheme of arrangement. The Scheme will require the approval of only AUSTAR minority shareholders. If the Scheme is approved, it is currently anticipated that a separate FOXTEL entity will lend the new LGI subsidiary the $1.52 per share cash consideration that will be paid to AUSTAR minority shareholders upon implementation of the Scheme. As an alternative, LGI may decide to substitute LGI or another financing party as the lender.
Second, following implementation of the Scheme and a restructure, FOXTEL entities will acquire LGI’s existing interest in AUSTAR for $1.52 per AUSTAR share. This second phase is expected to complete approximately six to eight weeks after the Scheme is implemented. To the extent FOXTEL provides the funding for the Scheme, FOXTEL has separately agreed with LGI to keep those funding arrangements in place for a specified period after completion of the transaction, and in certain circumstances will be liable to
For personal use only use personal For LGI for any breach of those undertakings. If LGI arranges substitute funding it will also receive that amount.
Although the transaction will be executed in two separate phases, AUSTAR minority shareholders and LGI will receive the same amount of consideration per AUSTAR share, and no other consideration will be paid to any party for their interest in AUSTAR.
Next Steps: A detailed Explanatory Memorandum for the Scheme containing information relating to the proposed Scheme, reasons for the Independent Directors’ unanimous recommendation and details of the shareholder meetings are expected to be mailed to AUSTAR shareholders after the ACCC and IRS conditions have been satisfied. It is anticipated that the relevant shareholders’ meetings and the final court hearing will take place after the conclusion of the ACCC and IRS regulatory processes, and documents will be sent to AUSTAR shareholders ahead of that time, with the proposed Scheme expected to be implemented in either December 2011 or early 2012.
AUSTAR is being advised by Goldman Sachs. Legal advice is being provided by Freehills.
Notes: (1) Operating Cash Flow – Revenue less Operating Expenses (excluding stock based compensation expense, foreign exchange gain/(loss), share of associates and significant items).
Media Contacts:
Rebecca Tabakoff Ilse Schache T + 61 (0)2 8298 6100 T + 61 (0)2 8298 6100 M +61 (0)419 229 878 M +61 (0)416 041 768 E [email protected] E [email protected]
AUSTAR United Communications (AUSTAR) www.austarunited.com.au AUSTAR (Australian Stock Exchange “AUN”) is a leading provider of subscription television services in regional and rural Australia, with more than 750,000 customers enjoying satellite digital television services. AUSTAR is also a significant provider of programming in the Australian television market through its 50% owned joint venture, XYZnetworks, which owns and/or distributes Nickelodeon, Nick Jr, Discovery Channel, Channel [V], [V]Hits, MAX, Arena, The Lifestyle Channel, Lifestyle Food, LifeStyle You, Country Music Channel and The Weather Channel. Liberty Global, Inc., the largest international broadband cable operator in terms of subscribers, holds an indirect controlling stake in AUSTAR.
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APPENDIX
SUMMARY OF IMPLEMENTATION DEED TERMS
The following is a summary of the key terms of the Implementation Deed (Deed) dated 11 July 2011, between AUSTAR United Communications Limited (AUSTAR), FOXTEL Management Pty Limited, Telstra Media Pty Limited and Sky Cable Pty Limited (collectively, FOXTEL), Liberty Global, Inc. (LGI) and LGI Bidco Pty Limited (Bidder). The Deed sets out the obligations of the parties to implement the first phase of the proposed transaction. This comprises a scheme of arrangement under which the AUSTAR shares that LGI does not already control will be acquired by the Bidder, a new, wholly‐owned subsidiary of LGI (the Scheme).
1 Conditions precedent Implementation of the Scheme is subject to the following conditions precedent:
• ACCC and FIRB approval;
• LGI receiving a satisfactory ruling relating to United States taxation;
• ASX and any other government agency approvals;
• court approval of the Scheme;
• approval of the Scheme by the AUSTAR minority shareholders;
• the independent expert appointed by AUSTAR concluding that the Scheme is in the best interests of AUSTAR minority shareholders;
• AUSTAR shareholders approving specified resolutions, including with respect to financial assistance and related party transactions necessary to effect the proposed transaction (EGM Resolutions);
• no court order or other material legal restraint preventing the transaction being in effect;
• no event or series of similar events occurring which has or could reasonably be expected to:
• reduce the AUSTAR group’s operating cash flow by more than $50 million in the 2012 and 2013 financial years; or
• have a material adverse effect on any of the AUSTAR group’s key approvals, permits or licences; and
For personal use only use personal For • no prescribed event occurs in respect of AUSTAR, such as a change in capital structure, disposal of a substantial part of the business, or an insolvency event.
2 Implementation AUSTAR is required to take all necessary steps to implement the transaction in accordance with the agreed timetable. This includes, among other things, executing the relevant transaction documents, appointing the independent expert, preparing the Explanatory Memorandum for the Scheme, applying for court approval and convening the Scheme meeting and a contemporaneous general meeting. AUSTAR is also obliged to conduct its business in the ordinary course and to not permit certain specified events to occur.
LGI and FOXTEL are also obliged to take all necessary steps to implement the transaction in accordance with the agreed timetable. This includes, among other things, executing the relevant transaction documents, assisting in the preparation of the Explanatory Memorandum for the Scheme and providing information to the independent expert.
In addition, FOXTEL is required to provide funding to the Bidder to acquire the AUSTAR shares under the Scheme, equivalent to $1.52 per AUSTAR share being acquired. This funding must be deposited in an escrow account operated by a third party escrow agent before the date on which court approval is sought for the Scheme. Upon implementation of the Scheme, LGI and the Bidder must procure that the AUSTAR minority shareholders are paid $1.52 for each AUSTAR share acquired under the Scheme with funds from the escrow account.
LGI has the option of arranging funding for the acquisition of the AUSTAR shares under the Scheme without assistance from FOXTEL, in which case LGI and the Bidder will be responsible for paying AUSTAR minority shareholders the Scheme consideration.
3 Independent Directors’ recommendation AUSTAR’s Independent Directors (Messrs Tim Downing and Roger Amos) have unanimously recommended that AUSTAR minority shareholders vote in favour of the Scheme and the EGM Resolutions in the absence of a superior proposal and subject to an independent expert concluding that the Scheme is in the best interests of AUSTAR minority shareholders. The Independent Directors may withdraw their recommendation if:
• the independent expert concludes that the Scheme is not in the best interests of the AUSTAR minority shareholders; or
For personal use only use personal For • AUSTAR receives a superior proposal.
4 Exclusivity AUSTAR and LGI are obliged to comply with certain restrictions until 29 February 2012, unless the Deed is terminated earlier (Exclusivity Period). These include:
• No shop: AUSTAR and LGI must not solicit or invite competing transactions.
• No talk: AUSTAR must not participate in any discussions or negotiations in relation to a competing transaction. However, AUSTAR may do so if the Independent Directors determine that:
• the competing transaction is, or could reasonably be expected to become, a superior proposal; or
• not doing so would involve a breach of the fiduciary duties owed by a director of AUSTAR or would otherwise be unlawful.
• No due diligence: AUSTAR and LGI must not make available any material confidential information concerning AUSTAR to any third party in connection with a potential competing transaction. However, such material may be made available if the Independent Directors determine that:
• the competing transaction is, or could reasonably be expected to become, a superior proposal; or
• not doing so would involve a breach of the fiduciary duties owed by a director of AUSTAR or LGI, or would otherwise be unlawful. 5 Break fee
AUSTAR has agreed to pay FOXTEL a break fee of approximately $19.3 million if:
• either Independent Director changes his recommendation in favour of the Scheme and the EGM Resolutions (or his statement that he will vote his AUSTAR shares accordingly), unless this is due to the independent expert concluding that the Scheme is not (or is no longer) in the best interests of AUSTAR minority shareholders (but not if the independent expert has done so because a superior proposal has been announced or otherwise made public); or
• before 29 February 2012 a third party announces a superior proposal and LGI sells its AUSTAR shares into that superior proposal (or it is
For personal use only use personal For substantially completed) within 12 months of its announcement. In certain specified circumstances AUSTAR is not required to pay the break fee even if either of these events occurs, such as if the Deed is terminated due to
certain conditions precedent not being satisfied or due to a material breach by FOXTEL.
6 Representations and warranties Each party has given representations and warranties which are customary for a transaction of this nature, such as warranties as to the accuracy of the information to be contained in the Explanatory Memorandum for the Scheme. The parties have also provided warranties relating to regulatory matters.
7 Termination The Deed may only be terminated in certain specified circumstances, including:
• by any party if:
• a condition precedent for the benefit of that party has not been satisfied or waived by 29 February 2012;
• the court makes a determination not to approve the Scheme;
• the Scheme has not come into effect by 29 February 2012; or
• before the court hearing to approve the Scheme, the Independent Directors withdraw their recommendation of the Scheme in the circumstances set out in 3 above;
• by LGI or AUSTAR:
• before the court hearing to approve the Scheme, if FOXTEL materially breaches any of its warranties or material obligations under the Deed;
• during a fourteen day period commencing on 11 December 2011, if ACCC approval has not been received and the terminating party considers that the corresponding condition precedent is unlikely to be satisfied by 29 February 2012; or
• before the court hearing to approve the Scheme, if an insolvency event occurs with respect to FOXTEL;
• by FOXTEL, before the court hearing to approve the Scheme, if :
• AUSTAR or LGI materially breaches any of its warranties or material obligations under the Deed;
• the Independent Directors do not recommend the Scheme or
For personal use only use personal For either Independent Director withdraws his recommendation; or
• an insolvency event occurs with respect to LGI;
• by AUSTAR, before the court hearing to approve the Scheme, if an insolvency event occurs with respect to LGI or the Bidder or if FOXTEL
does not provide the funding necessary for the Bidder to acquire the AUSTAR shares under the Scheme; or
• by LGI, before the court hearing to approve the Scheme, if an insolvency event occurs with respect to AUSTAR (or a material subsidiary) or if FOXTEL does not provide the funding necessary for the Bidder to acquire
the AUSTAR shares under the Scheme. For personal use only use personal For