No answers given to Murdoch's question
MILAN — Rupert Murdoch must be pinching himself after his three-day trip to Italy last week to push forward News Corp.’s $1.5 billion takeover bid for Telepiu, owned by Vivendi Universal.
For possibly the first time in his career, he’s trying to do a major media deal in Europe that’s not causing hysterical opposition from politicians or business rivals in the country concerned. In fact, he is experiencing the wholly unfamiliar sensation of being welcomed as a white knight.
Press reports of Murdoch’s visit focused, somewhat misleadingly, on his failure to win financial support for the deal from possible local partners — either from Telecom Italia, which co-owns Murdoch’s existing Stream pay TV platform, or from Italian banks.
Murdoch has made it plain that he needs Italian investors to take a 50% stake in the merged Stream/Telepiu — to share the costs, dodge antitrust issues and avoid having to consolidate the losses on News Corp.’s balance sheet.
Yet this apparent bad news — that nobody said yes — masked the real good news — which was that nobody said no.
Murdoch met with Italy’s key political, financial and media players in Rome and Milan, including Telecom Italia CEO Marco Tronchetti Provera, minister for Communications Maurizio Gasparri and Mediaset prexy Fedele Confalonieri.
He left with clear signs that nobody is opposing the deal.
“Even the government, this time, had a friendly attitude,” observes Augusto Preta, director of Italmedia Consulting and author of a recent report on pay TV. “The merger would save the national pay TV business and many national soccer clubs, which risk bankruptcy if new contracts with the pay TV operators are not signed by the end of the year.”
Mediaset, the TV empire of Prime Minister Silvio Berlusconi, which dominates the terrestrial TV biz, seems sanguine about the emergence of a stronger pay TV competitor.
A reborn pay TV operator would be a good buyer for Mediaset TV and film programming, while Murdoch would assure “friendly” political management of the web.
Senior banking sources in Italy say Murdoch did not even bring a detailed business plan with him on his “courtesy calls,” so there was nothing for them to reject.
Corrado Passera, CEO of one of the largest banks, Intesa Bci, confirmed he was still “waiting to see the business plan.”
News Corp. sources say that plan will be ready for presentation this week. They’re optimistic that Telecom Italia is willing to invest up to $400 million for a 19% stake in the merged company, with a combination of Italian and international banks picking up the remaining 31%.
Nonetheless, the leaked reports of a “disappointing” response from potential Italian investors served Murdoch’s purpose, coming just two days before last week’s crucial Viv U board meeting.
It’s clear that Murdoch wants to pay significantly less than the $1.4 billion in cash and debt that was agreed June 8 with Viv U.
Of course, Messier won’t want to renegotiate, but he can’t afford to have the deal collapse. Talks with VU probably will be reopened this week.
If the merger fails, Italy will be left with two ailing pay TV platforms engaged in a game of corporate chicken to see which will go bankrupt first.
In this scenario, there would be no winners.