Media giant News Corp (NWSA) and Australia-based Telecom company Telstra (AU:TLS) have agreed to offload their Australian cable TV unit Foxtel to British-owned DAZN Group in a deal valued at $2.2 billion (AU$3.4 billion). The sale of Foxtel to sports streaming and entertainment platform DAZN is expected to close in the second half of Fiscal 2025, subject to regulatory approvals.
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Foxtel Group is one of Australia’s prominent media companies having 4.7 million subscribers. Its businesses include streaming, sports production, subscription television, and advertising. The Foxtel Group is owned 65% by News Corp and 35% by Telstra.
Further Details of the Terms of the Deal
Under the agreement, News Corp will secure a 6% minority equity interest in DAZN and a seat on its board of directors. Moreover, shareholder loans worth AU$578 million owed to News Corp will be fully paid.
Likewise, Telstra will get about a 3% minority stake in DAZN, and shareholder loans of AU$128 million owed to it will also be repaid at closing. Foxtel’s current debt will be refinanced and transferred when the deal closes.
It is worth noting that the this transactions that values Foxtel at an enterprise value of AU$3.4 billion represents over 7x of its Fiscal 2024 EBITDA.
Rationale Behind News Corp’s Sale of Foxtel
News Corp’s decision to sell Foxtel follows its strategic and financial review of this digital and streaming business. Foxtel, which was launched by Rupert Murdoch’s media conglomerate News Corp in 1995, has been a drag on the company’s profitability over the past several years, as subscribers shifted to cheaper streaming options like Netflix (NFLX). Along with a decline in subscriber revenue, Foxtel’s profits were also hit by the rising cost of sports broadcasting rights.
News Corp is undertaking initiatives to optimize its portfolio and simply its structure. The deal will help News Corp focus on its key growth segments – Dow Jones, Digital Real Estate Services, and Book Publishing, while giving it a minority stake in a large sports streaming company like DAZN Group.
News Corp is under activist pressure to revamp its business. Last month, News Corp shareholders rejected activist investor Starboard Value’s attempt to end the company’s dual-class share structure.
Is NWSA Stock a Good Buy?
News Corp stock scores a Strong Buy consensus rating based on three unanimous Buy recommendations. The average NWSA stock price target of $41.33 implies 48.4% upside potential. Shares have advanced more than 13% so far this year.
