Takeover interest in Ten has boosted the struggling broadcaster’s share price, but analysts say predators face a major battle taking control and turning the company around.
Convincing major shareholders Gina Rinehart, James Packer and Lachlan Murdoch to take a loss on their investments, plus repairing Ten’s tattered reputation and balance sheet, are major hurdles facing any brave suitors.
Global media investor Providence Equity Partners is the latest firm reportedly running its eye over Ten, as the broadcaster continues to struggle for ratings and revenue.
The value of the network behind Masterchef and Offspring has slumped by about 80 per cent in the past four years to around $677 million.
Ten shares hit an 18-month low last week after it again warned of falling revenue – despite a ratings improvement – and rising costs.
Takeover speculation helped Ten shares recover some ground on Monday, adding 1.25 cents, or five per cent, to 25.75 cents by 1500 AEST.
A Ten spokesman said the company does not comment on market rumours.
IG market strategist Evan Lucas said he wasn’t surprised by takeover interest in Ten, as it could soon need to raise more money to push ahead with chief executive Hamish McClennan’s turnaround plans.
Just six months ago Ten needed the backing of three of its major shareholders – Murdoch, Packer and Bruce Gordon – to secure a $200 million loan in 2013.
“Private equity have an amazing ability to turn these things around,” Mr Lucas said.
“There’s no doubt they could walk in there, strip the thing to pieces, take what they want and change the structure very, very quickly.”
But to take control, private equity would need to convince Ten’s billionaire backers to suffer major losses on their investments, given the company’s shrinking value.
“There’s a lot of egos on the table,” Mr Lucas said.
“Whether or not they can handle the fact this has been a horrible investment and walk away from it, that what’s interesting in this.”
OptionsXpress analyst Ben Le Brun doubts that can be achieved.
“Considering Ten’s impressive board room have dipped back into their pockets to support Ten time and again, it would be hard to imagine a low ball private equity bid getting the nod of approval,” he said.
New owners would then have to deal with Ten’s growing debt, while also spending on new programming, particularly another lucrative sports broadcast rights deal, Mr Le Brun said.
“A major problem is the lack of live sport,” he said.