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SKY and INL announce merger discussions

SKY and INL announce merger discussions

SKY Network Television Limited (SKY) and Independent Newspapers Limited (INL), owner of 78.3% of SKY, today announced that they have reached agreement in principle to progress discussion on a proposal to merge the two companies.

In a joint statement, Ken Cowley, INL Executive Chairman and John Fellet, SKY Chief Executive said the key objectives of the merger proposal are to create a single listed company for the SKY business, provide fair value to all shareholders and ensure that there is no dilution of any shareholder’s interest in the SKY business. Under the merger proposal being discussed, a new company (referred to as “Newco”) would be established to acquire SKY and INL. SKY and INL shareholders would receive shares in Newco and cash payments in return for their current shareholdings.

SKY shareholders would receive one Newco share plus a cash payment for each SKY share. INL shareholders would also receive Newco shares and a cash payment. INL shareholders would be issued 78.3% of the Newco shares on a pro rata basis reflecting INL’s ownership of SKY.

It is anticipated that the cash paid out would ensure that all shareholders receive fair value for their existing shares and that Newco has an efficient capital structure.

“The overall effect is that the SKY business will be re-geared to an appropriate level,” Mr Fellet said.

Under the merger proposal, Newco, INL and SKY would also be amalgamated.

Newco would be the surviving company and would be renamed as SKY Network Television Limited. “SKY’s existing staff and management would continue to run SKY. It would be business as usual,” Mr Fellet said.

Mr Cowley said the proposed merger terms would enable shareholders in each company to be offered a choice of Newco shares and cash.

“If some shareholders prefer more cash and others more shares, to the extent that we can match those differing preferences, the merger can give shareholders what they want. However, the total number of Newco shares issued and cash paid out would not be affected,” Mr Cowley said.

Mr Cowley and Mr Fellet emphasised that the merger discussions are at an early stage. The boards and managements of the two companies have a considerable amount of further work to do before it can be brought to shareholders for their consideration.

The merger proposal would be implemented as a scheme of arrangement. It would require various regulatory approvals, the approval of the shareholders of each company and approval of the High Court.

Mr Cowley and Mr Fellet said finalising the proposal, preparation of the shareholder documents and other work would take several months to complete. “At this stage, we anticipate that the proposal would not be put to shareholders until the first quarter of 2005,” Mr Cowley said.

Mr Fellet noted that the ownership structure created by the merger would make it easier for SKY to pay dividends, but further consideration of dividends by SKY will await resolution of more detailed merger discussions.”

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