Sky TV, Vodafone drop $3.44b merger plan, withdraw appeal

UPDATE: Sky shares fall sharply.

UPDATE: Sky shares fell 5.01% to $3.22 as the market opened. 

EARLIER: Sky Network Television and Vodafone New Zealand have terminated their merger agreement which aimed to create the country's largest telecommunications and media group, and have withdrawn an appeal against the Commerce Commission's rejection of the plan.

The pay-TV operator and telecommunications group announced the decision in a joint statement to the New Zealand stock exchange this morning, without detailing their reasons.

The competition regulator had rejected the $3.44 billion media merger, saying the combined group would substantially lessen competition. Sky and Vodafone filed an appeal against the commission's ruling in the High Court in March, to give them time to consider the regulator's reasoning against the decision, and last month amended their appeal to detail their arguments.

"Sky and Vodafone New Zealand will continue to work together to strengthen our commercial relationship for the benefit of the customers and the shareholders of our respective organisations," the companies said in a three-sentence statement to the NZX today.

The merger would have seen Sky TV buying Vodafone NZ for $3.44 billion, funded by a payment of $1.25 billion in cash and the issue of new Sky TV shares at a price of $5.40 per share. Vodafone would have become a 51 percent majority shareholder in Sky TV, in what amounted to a reverse takeover. The pay-TV operator planned to borrow $1.8 billion from Vodafone to fund the purchase, repay existing debt and use for working capital.

Sky shares last traded at $3.39 and have shed 23 percent over the past year.

RELATED VIDEO: Sky-Vodafone merger rejection explained (Feb 23)


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