Last updated: February 25, 2013 11:55 am

Ten Network rises on bid hopes

Ten Network Holdings has appointed as its new chief executive a special adviser to Rupert Murdoch, fuelling speculation of possible News Corp interest in the ailing Australian broadcaster.

Ten, a distant third in Australia’s free-to-air television market behind channels Seven and Nine, dumped its chief executive James Warburton late on Friday and replaced him with Hamish McLennan, who was responsible for global brand partnerships at News Corp.

The surprise appointment highlights the close links between Mr Murdoch’s media group and Ten, which is chaired by his eldest son Lachlan Murdoch.

Shares in Ten rose 6.8 per cent to A$0.31 on Monday as investors reacted to the choice of Mr McLennan and the news he had bought stock in Ten worth almost A$1m.

Analysts said Mr McLennan’s appointment would increase speculation of a bid by News Corp.

Nomura analyst Daniel Blair said that following the planned separation of News Corp’s publishing and entertainment interests, “we believe the cable business is the more likely acquirer of Ten, with the publishing business more likely to be prevented from the acquisition due to competition considerations”.

Mr McLennan, who held the position of executive president, office of the chairman, at News Corp, said Ten was a “great business” and added that “as a sign of my enthusiasm for Ten I have personally invested in the company”.

Separately, Mr McLennan, who will take up his new role later this month, told local media that Ten would target an older audience demographic and would attempt to grab broadcast rights for sports such as cricket and tennis. The broadcaster has been suffering as its younger audience watches less commercial TV.

“I think we’ve skewed a bit too young,” he told the Australian Financial Review. “When we go to the younger end, that’s the end of the spectrum that’s fragmenting most.”

The decision to replace Mr Warburton a year after he joined followed a ratings slump and a series of embarrassing programming flops.

Ten’s share of the metropolitan TV market in Australia has fallen from about 27 per cent to 21 per cent over the past year. The company has launched two capital raisings in an effort to strengthen its balance sheet and invest in programming.

Later on Monday, News Corp’s Australian arm moved to quash the takeover speculation. It said there were no plans to acquire Ten and that much of the commentary on Mr McLennan’s appointment had been “highly fanciful” and “wrong.”

News Corp also responded to reports that the Labor government in Australia was considering the imposition of further tests for media ownership, saying they were not needed because of the massive increases in media diversity and “extensive pro-competition and pro-diversity powers” held by regulators.

“Furthermore, as has been demonstrated overseas, such tests are subjective, vague and imprecise, difficult to interpret and wide open to political interference.”

Digby Gilmour, analyst at CLSA in Sydney, however, said Ten would be attractive to News Corp because of Australia’s strict laws requiring key sports to be carried on free-to-air broadcasters.

“While News Corp’s pay-TV strategy typically involves exclusive ownership of such rights, in Australia it must sublicense content through a [free-to-view] network ... or acquire Ten,” he said.

Lachlan Murdoch owns a 9 per cent stake in Ten. Billionaires James Packer and Gina Rinehart, Australia’s richest woman, have holdings of 9 per cent and 10 per cent, respectively. Bruce Gordon, a regional TV owner, owns a further 15 per cent of the company.

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