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Nicholas Grove is a Morningstar journalist.

Consolidated Media Holdings (CMJ), which is 74 per cent-owned by billionaires James Packer and Kerry Stokes, has recommended a $3.45-a-share takeover bid from Rupert Murdoch's News Corporation (NWS).

The revised bid, which is 5 cents lower than the initial bid of $3.50 made by News Corp back in June, values CMJ at around $1.94 billion.

CMJ, which has investments in Australia's monopoly pay TV business Foxtel, as well as Premier Media Group, the producer of the Fox Sports programs, said on Friday it had received a binding proposal after conditions in the initial proposal were satisfied.

In a statement, CMJ executive chairman John Alexander said the offer from News Corp represents an opportunity for CMJ shareholders to realise their investment in CMJ at an "attractive valuation" and without incurring brokerage fees.

James Packer said the proposal is a "great outcome" for both CMJ shareholders and for News Corp and reflects a "fair price". Packer signalled his intention to vote in favour of the offer in the absence of a superior proposal.

While the offer of $3.45 a share represents a premium of around 15 per cent to CMJ's volume weighted average price over the three-month period to 3 May 2012, it is below what Morningstar head of equities research Peter Warnes believes to be a fair price of between $3.75 and $4.00.

Assuming the takeover goes ahead, shareholders on the register on the dividend record date of 28 September 2012 and on the scheme implementation date of 13 November 2012 will receive a total of $3.51 cash per share, reflecting the final dividend of 6 cents a share declared in CMJ's full-year results.

News Corp already owns a 25 per cent stake in Foxtel, with Telstra (TLS) holding 50 per cent.

Morningstar's Warnes has said previously that the jewel in the CMJ crown is its 25 per cent stake in Foxtel.

"Foxtel, jointly owned by Telstra and News Corporation, would have powerful financial capacity in any auction for future premier sporting broadcast rights," he said.

Warnes also said the penetration rate of pay TV in Australia is low compared to the rest of the world, providing "meaningful potential".