Will Lachlan Murdoch Buy Seven?
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Will Lachlan Murdoch buy Seven West Media? First let’s get Ten out of the way. The clock starts ticking on FIRB approval from this Thursday on the CBS deal to buy Ten.
The FIRB application was submitted on August 28 according to KordaMentha (Ten’s administrators) and FIRB approval goes live a month after that, this Thursday.
That then leaves Lachie without a major media asset - he has the Nova FM stations (Nova and Smooth) and many analysts reckon News will buy them.
But a better buy for News would be the rest of the old APN it doesn’t own (APN is now called HT&E and News owns 14.9%). Its worth just over $650 million and its two radio station networks cover more of Australia than do Lachie’s.
Michael Miller, News Corp’s Australian executive chair is a former CEO of APN and did last year’s deal to buy APN’s regional papers in Queensland and NSW.
Last week’s Coates $507 million purchase by Seven Group Holdings, Kerry Stokes, tells us that he and son Ryan prefer to invest in industrial services rather than the media. That half a billion deal is just under half the market value of Seven West Media, 41% owned by Seven Group.
That’s half a billion of extra cash sitting there, waiting to be snapped up. Stokes can hold, but Seven’s revenues and earnings will be lower this financial year (for yet another year) and there are few signs of any future improvement. No growth in the media - a it’s all about circling the wagons.
News Corp itself though is unlikely to be interested because management will be focused for the next 18 months on restructuring Foxtel with Telstra and then injecting Fox Sports into it.
The Australian’s Media section confirmed yesterday that Sally Connell, Fox Sports’ HR boss had been moved up to oversee the HR side of the integration across Foxtel and Fox Sports.
Bruce Gordon might be a partner, but now he has lost hundreds of millions in his long Ten adventure, his remaining play is in Nine Entertainment where he has 14.9% and a bit more.
Seven West Media shares plunged more than 5% yesterday to 68.5 cents (valuing the company at $1.04 billion) as investors realised the company will not be a media wheeler and dealer if any action happens. But that doesn’t preclude it being the target for a well structured deal.
Lachie could get a stake in Seven by selling the Nova radio stations in exchange for a big stake - a foothold and then doing a deal with a friendly private equity (Providence Equity Partners perhaps, the US private equity company Lachie joined up with to try and buy Consolidated Media from James Packer and in early 2008.
He couldn’t find a price that James Packer was happy with. Lachie wanted 50% of Cons Media which controlled 25% of Foxtel and 50% of Fox Sports. News Corp later mopped it up). Michelle Guthrie, the CEO of the ABC is a former partner at Providence Equity.
Last week’s Seven confirmed that it had talked to Prime Media (11% owned by Stokes) about a reverse takeover idea (promoted by Prime’s chair, John Hartigan who used to be CEO and chair of News Ltd in Australia but was punted by Lachie a few years ago).
Seven did not issue an official statement about an earlier inconclusive approach from Fairfax Media (which had been talking off and on with Nine).
The Coates deal tells us the Stokes are sellers of Seven West Media if the price is right. Seven Group was encouraged by its banks to find $400 million in extra capital to help support the $1.084 billion in extra debt from the Coates deal.
Would it put in extra capital into the highly indebted Seven West ($795 million) to help it buy another media company? It’s cheaper to place shares (watering down the Stokes holding) to someone like Lachie Murdoch?
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.