Twenty-First Century Fox 2003 Annual Report Download - page 73

71The News Corporation Limited
Notes to and forming part of the Concise Financial Report (continued)
FOR THE YEAR ENDED 30 JUNE, 2003
➤ NOTE 6Other items (continued)
(d) On 25 July, 2001, as a result of the exercise of rights by existing shareholders, FEG acquired 50.23% of Outdoor Life Network,
LLC (“Outdoor Life”) for approximately $608 million. This acquisition resulted in FEG owning 83.18% of Outdoor Life. On 23
August, 2001, a shareholder of Outdoor Life exercised its option to acquire FEG’s ownership interest in Outdoor Life for $977
million in cash. Upon the closing of the sale, the Group recognised a gain of $271 million.
(e) In June 2001, the Group sold its 31% interest in The Golf Channel for total consideration of approximately $695 million, of
which $676 million was received in cash during fiscal 2001. The Group recorded a gain on the sale of $476 million in relation
to this transaction.
(f) In March 2000, News Germany Television Holdings Gmbh, a subsidiary of the Group, purchased a 34% interest in TM3 KG and
TM3 Gmbh (to increase its holdings to 100%) for total consideration of $301.4 million. In January 2001, the Group agreed
to sell TM3 to KirchMedia for cash consideration of $265 million and $427 million in newly issued shares of KirchMedia. The
Group based its valuation of the KirchMedia shares on three different factors: (i) previous equity transactions that KirchMedia
had entered into with other investors, (ii) a required minimum cash payment of $427 million if KirchMedia did not issue such
shares, and (iii) the put option the Group received over its KirchMedia shares from KirchMedia’s parent in the amount of $427
million. The Group recorded a gain on this sale of approximately $18 million.
(g) In July 2000, TV Guide, Inc. (“TVG”) completed a merger with Gemstar International Group Limited (“Gemstar”) pursuant to
which TVG became a wholly-owned subsidiary of Gemstar which was renamed Gemstar-TV Guide International, Inc. (“Gemstar –
TV Guide”). The Group’s ownership of the merged entity at July 2000 was 21.38%. In May 2001, the Group acquired 80% of
Liberty’s 21.3% interest in Gemstar-TV Guide in exchange for 121.5 million ADRs representing 486 million preferred limited
voting ordinary shares of the Group. The acquisition by the Group of a further interest in Gemstar-TV Guide through the issuance
of preferred shares was a non-cash transaction, with investments and contributed equity increasing by $7,920 million. In
December 2001, the Group acquired the remaining 20% of Liberty’s interest in Gemstar-TV Guide in exchange for 28.8 million
ADRs of the Group representing 115.2 million preferred limited voting ordinary shares valued at $1,407 million. This
acquisition was a non-cash transaction, with investments and contributed equity increasing by $1,407 million. As a result of this
transaction, the Group’s ownership interest in Gemstar-TV Guide increased to 42.6% (42.9% at 30 June, 2002). As at 30 June,
2002, the Group owned 175 million shares in Gemstar-TV Guide and recorded a charge to reflect the permanent impairment in
carrying value of $11.1 billion. The charge was determined by reference to Gemstar-TV Guide’s share price at 28 June, 2002
of US$5.39 ($9.56) per share. During fiscal 2003, Gemstar-TV Guide’s market value continued to decline and the Group
considered several factors to determine if an additional charge was required. As a result of this review, the Group recorded
a $551 million charge to reduce the carrying value of the investment in Gemstar-TV Guide to US$3.75 ($6.66) per share
to reflect a permanent decline in value.
(h) In fiscal 2003, the Group recorded an impairment charge of $158 million related to the Group’s carrying value of its investment
in Knowledge Enterprises, Inc. (“Knowledge Enterprises”). The charge was based on Knowledge Enterprises’ recent equity rights
offering and reflects the estimated recoverable value of this investment.
(i) During fiscal 2002, the Group extinguished a substantial portion of debt owing on 10 1/8% Senior Debentures due in October 2012
and on 8 5/8% Senior Notes due February 2003. The Group recognised a loss of $64 million and $47 million respectively due to
the early extinguishment of debt. In June 2002 the Group and Fox Sports Networks, LLC, an indirect subsidiary of the Group,
irrevocably called for the redemption of all outstanding 8.875% Senior Notes due August 2007 and the 9.75% Senior Discount
Notes due August 2007. The Group recognised a loss of $80 million on the irrevocable early extinguishment of the debt. The
redemption was completed in August 2002. In March 2003, the Group purchased approximately 74% of its outstanding US$500
million aggregate principal 8 1/2% Senior Notes due February 2005 at a premium, plus accrued interest. The Group recognised
a loss of US$45 million ($76 million) on the early redemption of the 8 1/2% Senior Notes which is included within Other expenses
in the Statement of Financial Performance. Also in March 2003, 8,247,953 Trust Originated Preferred Securities (“TOPrS”)
were redeemed by the Group using proceeds from the issuance of Beneficial Unsecured Exchangeable Securities (“BUCS”).
The Group recognised a loss of US$37 million ($64 million) on early redemption of the TOPrS (including the write off of
deferred issuance costs) which is included within Other expenses in the Statement of Financial Performance.