E+Co Alerts

28
Sep

Legal update on the battle for control of Channel Ten

At a fascinating time for the Australian television industry, Edwards + Co Legal looks at how things are poised in the bid process control of Channel Ten. This article is based on public information and is current as at 28 September 2017.

INTRODUCTION

The past few weeks have seen significant developments in the Ten Network Holdings Limited (ACN 081 327 068) (“Ten”) administration process. Most importantly, CBS International Television Australia Pty Limited (ABN 37 000 005 925) (“CBS”) has emerged and established itself as the likely winner in the battle for control of Ten.

At the date of this memo, CBS’ bid (by way of Deed of Company Arrangement (“DOCA”)) has been proposed as the preferred bid by the administrators KordaMentha, who continue to act under the supervision of the receivers PPB Advisory, and accepted by the creditors of Ten.

This note provides a high level overview of the ongoing process and possible outcomes for CBS’ bid.

BACKGROUND: CREDITORS MEETINGS AND RECENT EVENTS

Events leading up to now

In a very general sense, the first creditors meeting during the administration of a company is used to establish and organise the parties who will determine the fate of that company. The second creditors meeting is then used to deliberate on the offers procured by the administrators, and ultimately decide on a course of action for the company.

At the first creditor’s meeting on 26 June 2017, CBS was confirmed as the largest secured creditor with a debt being owed to it of $795.5 million. During the procurement period between the creditors meetings, CBS submitted a bid for Ten by way of DOCA. The Gordon/Murdoch partnership also submitted a bid, but narrowly missed the formal deadline of 25 August. Both parties have since adjusted their bids with the intention of acquiring Ten.

Although the second creditors meeting was slated for 12 September, it was delayed until the 19th due to an urgent legal application by WIN (Gordon’s entity). The NSW Supreme Court heard and ultimately rejected WIN’s arguments that:

• the second creditors meeting should be delayed as the creditor’s report recommending the acceptance of the CBS bid provided insufficient information; and
• CBS should not be allowed to vote at the creditors meeting.
When the meeting went ahead CBS and the Ten staff carried the vote to accept the CBS bid by way of DOCA – CBS provided the requisite level of support for the bid relative to value owed to creditors, whilst the Ten staff ensured the bid received the requisite number of votes (i.e. by way of value of debt and number of creditors.)

Events in the forthcoming weeks

As the second creditors’ meeting accepted the CBS bid, the finality of the CBS acquisition is dependent on acceptance by the court and the approval of the transaction by the Foreign Investments Review Board (“FIRB”).

The court approval is contingent on whether the transfer of shares to CBS is considered in the best interests of the company as a whole, and does not breach other shareholders’ rights. FIRB approval is contingent on CBS’ acquisition of Ten not being contrary to Australia’s national interest.
This process is expected to be completed by the start of November. With respect to the court approval, a three-day hearing has been listed to begin on 31 October. Here is a brief timeline of important dates leading up to the hearing:

• 10 October – KordaMentha will submit an export report to ASIC
• 13 October – Interested parties will be required to file notices of appearance.
• 16 October – The court will provide further directions
• 31 October – Three-day hearing begins

POSSIBLE CHALLENGES TO THE CBS ACQUISITION

It is considered highly unlikely that the transaction would not receive FIRB approval.

Not receiving court approval is the likelier avenue by which the CBS acquisition could be stopped by interested parties. In light of the support CBS seems to have of Ten employees, together with the powerful financial standing of CBS, the potential strength of any challenge remains to be seen.

For further information, please contact:

James Edwards
Principal
e: james@ecolegal.com.au
office:+61 2 9331 5188

Noyan Nalbantoglu
Paralegal
e: noyan@ecolegal.com.au
office:+61 2 9331 5188

About James Edwards
James is the founder and principal of Edwards + Co, and advises businesses on legal and commercial issues in a world enabled, disrupted and re-assembled by the internet of everything.

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