Murdoch son scraps Australia media firm buyout plan

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Murdoch and Packer's joint bid for Consolidated Media, launched in January, stalled last month when key financial backer SPO Partners & Co withdrew.

SYDNEY (Reuters) - Australia's Consolidated Media Holdings Ltd <CMJ.AX> said a proposed A$3.3 billion ($3.1 billion) buyout offer from Lachlan Murdoch, son of media magnate Rupert, and Australian gaming tycoon James Packer, would not proceed because they failed to agree on terms.

Murdoch and Packer's joint bid for Consolidated Media, launched in January, stalled last month when key financial backer SPO Partners & Co withdrew.

The deal would have marked Lachlan's first big business move since quitting his father's business in 2005. He remains a News Corp <NWSa.N> director.

Lachlan Murdoch said in a letter to Consolidated Media that his private company, Illyria Pty Ltd, could not agree on "material changes" to the terms of the deal, and the decision to withdraw was not due to difficulty in arranging funding in current markets.

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He said Illyria had arranged equity funding and had "substantially progressed" in talks with its debt financiers.

Illyria had scrambled to replace equity funding from SPO Partners with an equity commitment from existing investors.

Debt-funded acquisitions have become increasingly expensive because a global credit crunch has sent financing costs sharply higher, and analysts said funding was likely a key factor in the privatization collapsing.

"It always was a tough ask, in an environment where credit was becoming more difficult to find, for Lachlan to put together a private equity based bid," said a Sydney-based fund manager who asked not to be identified.

"There are some very attractive assets in the company, the question is who has got the capacity to stump up and pay the price," he said.

Consolidated owns 25 percent of pay-TV provider Foxtel, 25 percent of Australian publisher PBL Media and stakes in online assets.

Packer and new financier, U.S. private equity firm Providence Equity Partners, had been locked in weekend negotiations over the price of the deal, The Age newspaper reported earlier.

Packer changed his mind about forming a 50:50 joint venture, instead seeking to sell down a 38 percent stake in CMH he already owns to 25 percent, leaving Murdoch and Providence to take a 75 percent stake, The Age said.

Packer also insisted on a takeover price of A$4.80 a share, the newspaper said without naming its sources.

The January bid was worth A$4.70 a share at current prices, while Providence wants to offer around A$4.60, the article said.

Consolidated Media shares last closed at A$4.07 and were in a trading halt.

Packer and Murdoch's January buyout offer came less than three months after existing Consolidated shareholder Packer separated his late father Kerry's media business from gaming to focus on building up the gambling operations.

Illyria and Consolidated were being advised by Lazard Carnegie Wylie.

($1=A$1.08)

(Reporting by Victoria Thieberger and Miranda Maxwell; editing by Jonathan Standing)