The Distillery: Ten’s meal-ticket

Jotters say Ten still has a long way to go after its rescue package from the company’s big names.

The long awaited deal in Washington came through as expected, leaving most commentators looking elsewhere for fodder. Ten Network was in the spotlight as it issued its latest quarterly report and announced a new debt facility with some familiar names popping up as guarantors.

Ten has been battling an identity crisis at the worst possible time and questions still linger about the media group’s ability to extract itself from the hole it has dug. The group’s biggest plus is its core of major shareholders and again they put their money where their mouth is yesterday, albeit with one notable exception.

Indeed, the backing of Lachlan Murdoch, Bruce Gordon and James Packer is a good result for Ten, Fairfax’s Elizabeth Knight suggests, even if Gina Rinehart didn’t come to the party. Importantly, the deal – a rescue package by another name – avoids the needs for further dilution of the company’s stock.

“To the extent pure returns are what any of the Ten investors have aspired to, they have failed miserably. How much appetite the big shareholders (or the institutional shareholders) would have had at this time for another capital raising has got to be questionable. While they appear to continue to support the chief executive, Hamish McLennan, Rinehart has not joined the others as a guarantor of Ten's new loan facility, although she is said to be supportive of the management strategy.”

The Australian’s Tim Boreham takes a closer look at the group’s business and concludes Ten’s focus on ‘event TV’ is admirable, but it has a long way to go to become a leader in the category.

“As McLennan notes, there's nothing that fits the "event TV" category quite like premium sport. Hence the network's decision to snare the rights to the KFC 20-20 cricket whackathon. Premium? That's debatable, but at least it plugs a handy 125 hours of prime-time programming over the languid summer.”

Meanwhile, Boreham’s colleague at The AustralianJohn Durie, takes the microscope to Bluescope Steel’s recent acquisitive streak, noting Australia could be on the verge of a steel monopoly. However, the competition watchdog might have something to say about it.

“The fact the Australian steel industry is on its knees is of course not an issue from a competition policy perspective, with customers – not suppliers – the main focus. So-called behavioural undertakings are very much second-best solutions but Bluescope's O'Malley will no doubt have his lawyers banging this dream to get his Pac-man-like mopping up of the steel industry completed.”

In other company news, Boral turned heads with a $US1.6 billion joint venture arrangement with America’s USG. The deal, The Australian Financial Review’s Chanticleer columnist Tony Boyd explains, has two positives and one negative. On the plus side, the group gets access to new technology as well as a much needed cash injection, but it has lost part of one of its best assets.

“The transaction means Boral ends up with a more conservative balance sheet, new lighter plasterboard products and the ability to pump more product through the previously under-utilised distribution channel. Boral could have obtained the technology through a licensing arrangement, but the balance sheet pressure needed to be addressed.”

The Australian’s Bridget Carter says the deal shows the strong capability of boss Michael Kane to run a business. It is the latest in a series of decisive steps from the chief executive of one year.

“Cutting more than 1000 jobs and shutting down the company's worst cement plant in Victoria have been two of them, and while the latest $1.6 billion plasterboard joint venture deal with USG Corp could be the seen as the most dramatic move so far, it's unlikely to be the last of his sweeping changes.”

Moving to macroeconomic news, The Australian’s Richard Gluyas makes the case for house prices to rise further on the back of analysis from NAB’s chief economist Alan Oster, while Fairfax’s Michael Pascoe says we should prepare for failure on the government’s plan to cut red tape. Politicians simply aren’t very good at it.

Shifting to Washington, the AFR’s John Kehoe argues the latest deal amounts to little more than a kick of the can down the road while his colleague, Ben Potter, adds that for all the recent crises and deals, US policymakers have “barely touched the surface of” their medium and long-term budget problems.

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