SYDNEY (Reuters) - CBS Corp’s (CBS.N) buyout of struggling Australian broadcaster Ten Network Holdings Ltd (TEN.AX) will be delayed at least a week, after a court on Thursday said it would pause the deal to hear a challenge by a rival bidder.
The decision opens a new front in a battle between CBS and a consortium led by Lachlan Murdoch, co-chair of News Corp (NWSA.O), over Australia’s third-ranked free-to-air TV station.
Murdoch and his business partner Bruce Gordon, who between them had controlled a fifth of the company when it entered administration, were the sole suitors until CBS’s surprise agreement to buy Ten on Aug. 28 for an undisclosed sum.
The youth-focused broadcaster with a national reach and strong brand became a tempting target as its market capitalization plunged to just A$58 million ($46.3 million) in June.
Ten entered administration that month after Gordon and Murdoch dropped a debt guarantee. Its biggest creditor, however, was CBS, which it owed A$844 million for licensing shows such as NCIS and CSI: Crime Scene Investigation.
Only three years previously it had rejected a $588 million takeover bid from Time Warner Inc (TWX.N).
Gordon lodged a court challenge to the CBS buyout late on Wednesday, alleging Ten’s administrators had mishandled the network’s sale and should not allow CBS to vote at an upcoming creditors meeting.
His lawyer, Andrew Bell, told the New South Wales Supreme Court on Thursday there were “defects” and “information deficiencies” in administrator KordaMentha’s communications with creditors.
Richard McHugh, representing KordaMentha and the network, said Gordon was merely a “disappointed under-bidder” and that his client expected the challenge to fail.
Nevertheless, Justice Ashley Black said a planned meeting of Ten’s creditors, set for Sept. 12, must be postponed a week to accommodate the case, lest it approved the buyout before the challenge was properly heard.
“The egg would be scrambled” and the deal likely beyond the court’s power to unravel were the meeting to go ahead, “without the matter determined on its merits”, Black said.
He set the case for hearing on Sept. 12, provided the parties agreed to the date.
Gordon and Murdoch’s takeover bid was approved by Australia’s competition regulator in August, but remained stymied by media laws that prevent a single party from owning print, radio and television assets in the same market.
No such restrictions apply to the CBS bid.
Gordon, a billionaire, owns a regional television station and Murdoch’s News Corp publishes about two-thirds of the nation’s newspapers.
($1 = 1.2534 Australian dollars)
Reporting by Tom Westbrook; Editing by Stephen Coates and Himani Sarkar