I'm also of the opinion that Sky TV, Silver Lake and NZR will have some kind of deal playing out these coming months.
Just a gut feeling.
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I'm also of the opinion that Sky TV, Silver Lake and NZR will have some kind of deal playing out these coming months.
Just a gut feeling.
I pray to God Sky are not buying anything, let alone a piece of CommercialCo. I can't see how we would ultimately benefit from that. Sky TV benefit from our relationship with NZR so long as we are able to continue renewing the rugby rights at a 'reasonable' price (i.e. a price that we can still earn a living from). If we owned a slice of CommercialCo we would be in a bizarre situation whereby on one hand we want to pay as little as possible to renew NZR, but on the other hand we want NZR to go out to market and get the highest possible bid to maximise CommerciaCo revenue.
It doesn't make any sense.
And when we consider the RugbyPass fiasco, we really don't want Sky going out to buy anything. What are the odds that they would make a good purchase 'this time'?
Given the fact that the Investor Day was cancelled, I think it is much more likely that Sky TV is the target of some kind of a deal. If Sky were looking to buy something, I don't see why they would cancel the Investor Day at the last minute? You would still have it to front up to shareholders about strategy and just say that you are still actively assessing opportunities and will have more to say by the FY results, "in the meantime this is the new date for the STB roll out, it was delayed due to an international chip shortage (not our fault!), these are the other things we are doing to deliver on the strategy blah blah blah..."
But to just cancel it out of the blue right at the last minute? It seems more likely to me that Sky are in discussions (brokered by Jarden I assume) to assess M&A possibilities. The conversations aren't at the stage that warrant an announcement to the market, but are warm enough to make The Board think there is a good chance that 'something' will come out of talks.
If Jarden are doing their job properly then there should be multiple interested parties looking at options with Sky. An outright takeover by PE is one option, or perhaps even an outfit like Comcast could want to become a 'cornerstone' type investor whereby they pay us $x to take a large equity stake in the business with the guarantee of preferrential content deals moving forward. Personally, I would think that an outright sale would be the easiest/cleanest.
As I was thinking this through, I started to remember our good friends at NZME. With the TVNZ-RNZ merger going ahead, Michael Boggs must surely be taking a harder look at Sky. And when you add to the mix the fact that Osmium own big chunks of shares in SKT and NZM, you would have to think that they would like to see something happen here. When I first considered this merger a while back I balked because of my initial perception that the quoted values for each company are 'out of whack'. And they are, but maybe not to as much of an extent as I initially thought.
In fact, Michael B could probably put together a compelling argument that NZM shares are also undervalued too.
One way to get a 'fair deal' done would be to merge the two businesses based on current market valuations but allow Sky to pay some of their cash to existing SKT shareholders as a special dividend. That kind of deal would probably get over the line with SKT shareholders, and NZM may be willing to throw a bone to get the deal over the line if the alternative is that Sky is considering offers from PE.
So, then we look ahead at the merged SKT-NZM business:
- A very large multi-platform NZ media play across Pay TV, newspaper and radio
- Backed up with broadband and content deals with Google and Meta
- ~$1B in combined Revenue
- NPAT likely ~$70M
- FCF also likely around $70M
- A better, stronger business - if the market liked it better than the two separate entities, and gave a PE of 15 you are looking at a $1B business. At the time of doing the merger, the business would be valued at only $700M based on prevailing market values, so the potential upside for SKT and NZM shareholders is high.
- No cash borrowings required to 'fund' the deal. Straight merger based on SKT and NZM share price.
- At current valuations, Sky could issue 105M new SKT shares for NZM holders. $1B quoted value divided by 280M total SKT shares = $3.57/share with growth potential.
- No issues with regulatory approval given the TVNZ-RNZ merger
Let's say Sky could pay a special dividend of $50M (29cps) to current shareholders, then the new merged entity would hit the ground running with $100M cash and zero debt. Sky should be able to negotiate a higher special dividend quite frankly (especially given NZM is currently distributing its capital to shareholders via a buyback).
Anyway, all well and truly deep in the world of speculation. Just reaffirming my position that I believe Sky are in talks (whereby Sky is most likely the target) and the NZME angle is a possibility.
Perhaps.
All I know is there is a good argument that both businesses are undervalued, produce solid FCF and would be stronger together. It would be very strange (and disappointing) if Sophie and Michael weren't talking to see what is possible in light of the TVNZ-RNZ merger.
If Private Equity are in the mix and offer a more attractive cash offer to buy Sky then that is A-OK too.
But a deal with NZM, structured in the right way, could be fair too all parties and still leave Sky TV as a listed business but with much better prospects moving forward.
Penny for your thoughts Johnnythehorse???
Chart is saying $3.50 very very soon. Stop reading here Mistatea.
Chart has broken down on shorter timeframes, coinciding with a breakdown in the general NZX50 index. The $2.35 region held (very good buying area for those accumulating), so this could be seen as healthy monthly consolidation (but with shorter term red flags) at this stage. Certainly has some work to do to regain a strong bull status. Won't be seeing $3.50 soon unless we get an announcement (which ultimately is going to drive price anyway). Lack of liquidity seems to move the price around quite rapidly.
Could speculate what's going on behind the scenes, but I couldn't really add anything new. Just a waiting game to see what happens.
Disc: haven't touched my position, happy holder.
I think it is also noteworthy that the chairman of the board does not even live in the country anymore. Is it common for NZ company chairpersons to be permanent overseas residents and not be replaced? Why bother replace him if the company is getting bought out, maybe he is chilling in the ComCast offices right now.
The sitution now is the end game which was started by whoever was pulling the strings when the shares were massively diluted. It is no coincidence that Martin Stewart came from th Uk and has returned there and the present chairman does not need to live here anymore.
Ultimately money talks and bullsh1t walks.
Let's just hope that Pooman isn't so incompetent that he can't negotiate a good deal for Sky shareholders.
He has overseen massive wealth distruction since he took the role, so this is probably his opportunity to 'pull it out of the bag' at the end for shareholders. That way when he seeks board roles at other listed companies in the future he can point to what a 'success' his time at Sky was.
Just look at 'dem gainz'...