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NEWS CORPORATION
Notes to the Consolidated Financial Statements (continued)
Other fiscal 2005 transactions
In September 2004, the Company purchased Telecom Italia S.p.A.’s(“Telecom Italia”) 20% interest in SKY Italia for cash consideration of $108
million (€88 million), thereby increasing the Company’s ownership interest in SKY Italia to 100%.
In April 2005, the Company and Rainbow Media Holdings (“Rainbow”) exchanged their investments in Regional Programming Partners
(“RPP”). Under the terms of the agreement, the Company exchanged its 40% interest in RPP for Rainbow’s 60% interests in Fox Sports Net
Ohio (“FSN Ohio”) and Fox Sports Net Florida (“FSN Florida”) (formerly included in the RPP business) and Rainbow’s 50% interests in National
Sports Partners (“NSP”) and National Advertising Partners (“NAP”) increasing the Company’s ownership in these entities to 100%. In addition,
the Company retained its 40% interest in Fox Sports Net Bay Area (“FSN Bay Area”) (also formerly included in the RPP business) and remitted
to RPP the $150 million in promissory notes it received from RPP as a result of RPP’s December 2003 acquisition of the Company’s direct
ownership interests in Fox Sports Net Chicago and Fox Sports Net Bay Area. The Company accounted for this exchange in accordance with
APB Opinion No. 29, “Accounting for Nonmonetary Transactions” and accordingly the Company recorded the assets received at fair value upon
closing. The Company has recognized a loss of approximately $85 million on this restructuring in Other, net in the accompanying consolidated
statement of operations.
Fiscal Year 2004 Transactions
In December 2003, NDS, a subsidiary of the Company, acquired 100% of the MediaHighway middleware business from a subsidiary of
Thomson SA and licensed certain related patents from Thomson SA for a total consideration of $73 million (€60 million) in cash. Subsequent to
this acquisition, the Company concluded that certain intangible assets recognized on acquisition were not supported by projections of the
incremental future cash flows attributable to the acquired business. Accordingly, the Company has recorded an impairment charge against these
intangibles of $11.3 million reflected in Operating expenses within Operating income.
In December 2003, SKY Italia sold two wholly owned subsidiaries, Prima S.p.A. and Europa S.p.A., for total consideration of $112 million
(€90 million). The Company ascribed a fair value of $112 million to these assets in connection with the Telepiu acquisition (see fiscal year 2003
transactions below) and accordingly no gain or loss was recognized on the sale.
In December 2003, the Company sold its 50% direct ownership interests in SportsChannel Chicago Associates (“SportsChannel
Chicago”) and SportsChannel Pacific Associates (“SportsChannel Bay Area”) (collectively the “SportsChannels”) to subsidiaries of RPP for
consideration of $150 million. This consideration was paid wholly in the form of two three-year promissory notes issued by the subsidiaries of
RPP, which own only the acquired interests in the SportsChannels, in an aggregate amount of $150 million and bearing interest at prime plus
1% per annum. The notes are secured by a pledge of 100% of the interests in SportsChannel Bay Area. Upon the close of this sale, the
SportsChannels are held 100% by RPP and indirectly 60% by Rainbow Media Sports Holdings, Inc. and 40% by the Company. The Company
recognized a net gain on the sale of the SportsChannels of $9 million, which is reflected in Other, net in the accompanying consolidated
statements of operations.
In February 2004, the Company sold the Los Angeles Dodgers (“Dodgers”), together with Dodger Stadium and the team’s training facilities
in Vero Beach, Florida and the Dominican Republic, to entities owned by Frank McCourt (the “McCourt Entities”). The gross consideration for
the sale of the Dodgers franchise and real estate assets was $421 million, subject to further adjustment. The consideration at closing was
comprised of (i) $225 million in cash, (ii) a $125 million two-year note, (iii) a $40 million four-year note secured by bank letters of credit and (iv) a
$31 million three-year note that is convertible, at the Company’s option, into preferred equity in the McCourt Entities if unpaid at maturity. The
Company had agreed to remit $50 million during the first two years following the closing of the transaction to reimburse the McCourt Entities for
certain pre-existing commitments which has been substantially paid. During the fourth quarter of Fiscal 2005, the Company recognized a gain of
$17 million as a result of the subsequent finalization of certain contractual terms, which resulted in a net ultimate loss of $2 million in the
disposition of the Dodgers. As of June 30, 2005, the McCourt Entities have paid off all of the notes except for $125 million note secured by non-
team real estate which is currently due in February 2008.
Fiscal Year 2003 Transactions
In August 2002, the Company acquired WPWR-TV in the Chicago designated market area (“DMA”) from Newsweb Corporation for $425 million
in cash. This transaction has been treated as a purchase in accordance with SFAS No. 141, “Business Combinations.”
In April 2003, the Company and Telecom Italia acquired Telepiu, S.p.A. (“Telepiu”), Vivendi Universal’s satellite pay-television platform in
Italy, for approximately $874 million (€788 million), consisting of the assumption of $388 million (€350 million) in outstanding indebtedness and a
cash payment of $486 million (€438 million). In the acquisition, Telepiu was merged with Stream S.p.A. (“Stream”), and the combined platform
was renamed SKY Italia, which was owned 80% by the Company and 20% by Telecom Italia S.p.A. The excess purchase price over the fair
value of the net assets acquired of $638 million is reported within publishing rights, titles, television licenses, and goodwill. The results of SKY
Italia have been included in the Company’s consolidated statements of operations from April 30, 2003, the date of acquisition. As a result of the
acquisition, commencing April 30, 2003, the Company ceased to equity account its share of Stream’s results.
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