Optus Communications is set to raise more than $2 billion in a partial
float on the sharemarket after settling its legal dispute with Seven Network and
taking over its troubled pay TV and local telephony offshoot, Optus Vision.
A deal between the four Optus Vision shareholders - Optus Communications
(46.5 per cent), US West (46.5 per cent), Mr Kerry Packer's Publishing and
Broadcasting (5 per cent) and Seven Network (2 per cent) - was struck at 3.30 am
yesterday, after months of haggling.
Optus Communications will own all of Optus Vision after buying out the other
three with share offers.
Seven, which set off the protracted negotiations with its October lawsuit
over a shareholding agreement for Optus Vision, was a big winner. It got the
right to buy 50 million Optus shares at $1.25 apiece. Optus shares are expected
to be sold at between $2 and $2.50 each in the float.
Seven also got an entitlement to buy a further 50 million shares in the
In return, Seven agreed to drop the legal action that thwarted the float
Mr Kerry Packer's PBL will get an option to buy 30 million Optus shares at
It will also have an entitlement to a further 25 million shares in the float.
Both companies will retain their interests in the programming vehicles -
MovieVision and SportsVision - which will remain outside Optus. SportsVision has
exclusive pay-TV rights to show AFL.
American telephone company, US West, will also get the right to buy an
unspecified number of Optus shares, although the company would not reveal the
US West's continuing involvement is critical to Optus's local telephony
ambitions. The American phone company is charged with making the local telephony
technology work, after nine months of problems since the ambitious launch last
US West will get a success fee of up to $100 million, linked to how many
subscribers sign on for the local telephone service by December 2000.
Optus Communications's major shareholder, Mayne Nickless, has agreed to pay
this success fee. In return, Mayne Nickless has been issued 30 million shares in
Optus Communications, at $1 each, which will be retained after the float.
Optus Communications's chief executive, Mr Ziggy Switkowski, said last night
it was "a very tough performance level to achieve".
Mr Switkowski said Seven, PBL and US West would collectively hold between 5
and 10 per cent of Optus Communications after the float.
The exact percentage of their combined shareholdings will be known by the end
of April when the Optus Communications board decides how much equity will be
raised in the float.
Optus Vision has a heavy debt burden and would have needed a $400 million
equity injection at the end of this month.
The total financing now rests with Optus Communications, which has agreed
with its banks to raise additional equity in the float to cover Optus Vision's
requirements. This should see the float value increase from the original target
of $1.5 billion to more than $2 billion, with about 40 per cent of the shares
Mayne Nickless's managing director, Mr Bob Dalziel, said a prospectus could
be ready by the last week of June, with a listing on the sharemarket six weeks
later. This would see Optus listed on the market in August, two to three months
ahead of Telstra.
Mayne intends to sell its 24.9 per cent stake into the float.
Mr Switkowski described the merger of Optus Communications and Optus Vision
as a "sensational outcome". He also predicted the restructuring would be a major
step towards rationalising Australia's pay-TV industry, which has lost $1.2
billion in under four years.
He said Optus Communications could now push ahead and hold discussions with
Telstra about a cheap entry into the local telephony market, in return for
Telstra's gaining access to Optus Communications's overhead cable network. With
Optus Vision as a separate entity, this had been a difficult aim.
The move should see the rationalisation of programming in the pay TV
industry. Optus Communications is expected to announce in the coming weeks a
spin-off of its pay TV programming interests to a buyer. This is likely to see a
merger of the two rugby league competitions.
All of the players, including Mr Rupert Murdoch's News Corp, have been
involved in discussions in recent weeks.
THE PAY TV SHAKE-UP
Optus Vision shareholders: Up to 10% after float
* drops damaging lawsuit
* gets right to buy 50m Optus shares at $1.25 each and 50m more at float
* retains 30pc stake in SportsVision, 8.3pc in MovieVision (pay TV programme
PUBLISHING & BROADCASTING
* gets rights to buy 30 million Optus shares at $1.50 each and 25 million
more at float price
* retains 20pc stake in SportsVision, 8.3 pc in MovieVision
* forgoes $605m investment in Optus Vision
* but gets convertible note to buy Optus shares
* gets up to $100m if it achieves targets for local telephony
* Full steam ahead for $2bn public float, takes over Optus Vision, in which
it invested $605m* Local and long distance calls, mobile, pay TV all under one
* Pay TV programming contracts intact
Optus Vision shareholders: 26.1%
* will pay up to $100m to US West for its local calls incentive
* buys 30million new shares at $1 each lifting stake from 24.99pc to 26.1 pc
* can proceed to sell stake through float
Optus Vision shareholders: 73.9%
Cable & Wireless: 24.5pc
AMP Society: 10.3 pc
AIDC: 9.6 pc
National Mutual: 6.1 pc