Kerry Stokes yesterday started the public side of his campaign to remove the board of West Australian Newspapers at a shareholders meeting in Perth later this month.
In speech to a business function in Perth Mr Stokes said Seven Network had only one non-performing asset and that was its $480 million investment in WAN.
"At Seven we have no debt and we have over $3 billion in assets, either cash or securities. The only non- performing asset we own is West Australian Newspapers, in which we have a $480 million investment.
"I have a strong desire to turn this around and to align the interests of Seven shareholders with those of WAN shareholders.
"However, I hope you understand it is about more than money. It is about returning this newspaper to its rightful place.
"We want it to retain a broad Western Australian shareholding so Western Australians can proudly invest in this company."
His comments were, well natural, given his objective, so it wasn’t surprising that WAN fought back late yesterday.
WAN said in a statement that criticism of its flagship publication by the Mr Stokes was "unwarranted and self-serving".
WAN chairman Peter Mansell said Mr Stokes’ comments were an attempt to divert attention away from the key issues previously highlighted to WAN shareholders, particularly the issue of control.
Mr Stokes reiterated that he did not want control of WAN, but did want Seven to hold two seats on a seven seat board, which he wants to be expanded from five seats.
"In 1995, Mr Stokes’ strategy with Seven Network was to build a stake in the company, criticise performance, call an EGM, spill directors, install himself as chairman and take effective control," Mr Mansell said in a statement today.
"He did this over a period of time without ever making a takeover bid through which he would have had to offer Seven shareholders a control premium.
"The similarities with his actions now in relation to WAN are striking.
"WAN shareholders have seen Seven’s national advertising campaign, the single-purpose website, the survey, the direct mailout, the pre-completed proxy forms, the phone campaign, the media appearances and now the speech.
"Shareholders are entitled to ask themselves whether the extent of the resources being thrown at this by Seven Network and Mr Stokes is consistent with a desire to simply be appointed to the WAN board."
WAN said it had "previously acknowledged the challenges that accompanied its $210 million press upgrade."
"That important project was successfully completed by WAN’s management team in late 2007," it said.
"The benefits of that significant investment in WAN’s future will be evident in the March 08 quarterly results which will be released on 10 April 2008."
But the WAN reply won’t mollify Mr Stokes, who told the business function:
"It has always been our intention and our ambition to have board representation. I have personally discussed this interest – more than 18 months ago – with a number of the current directors and, until now, never heard one word of opposition. I have only ever sought two Board seats out of seven, and in anyone’s language that does not constitute control
"The Board has implemented a strategy, over a long period of time, to cut costs and reduce investment in the franchise. It is nothing more than value stripping. This may make profits look good today but it threatens the long-term sustainability of earnings and dividends.
"I believe there has been an accumulation of issues at The West, most notably a 5 year decline in circulation, a breakdown in key relationships, a strategy of cutting costs to improve financial performance and an ongoing intent to go into debt to pay dividends.
"You cannot build a business of tomorrow unless you invest in the business now.
"You can’t grow a business by cutting costs. You can’t sustain a business’ profitability if you continue to borrow to pay dividends. A declining circulation is the most fundamental issue facing the company.
Mr Stokes said WAN was going backwards despite the resources boom and the state’s prosperity and growing population.
"Today, in the midst of Western Australia’s prosperity and growing population, WAN is going backwards in its core business of selling newspapers and attracting readers. Circulation continues to decline, and for the highly profitable Saturday edition at an alarming rate.
WAN has previously rejected Seven’s calls for two extra board seats that would have brought the total number of WAN directors to seven.
"We would hire external consultants to ensure that the extra directors are independent," Mr Stokes said.
"We don’t want to control The West – we want two seats out of seven."
Mr Stokes said that when he took control of The Canberra Times, circulation had vastly improved and profits grew sevenfold.
"This isn’t rocket science," he said.
"But when companies become so insular, they think they have the right to tell the customer what they want, which is a downward slope."
Mr Stokes said WAN was relying on its reputation, not performance, and criticised the paper’s problems with circulation.
When asked from the floor how WAN could improve its newspaper sales, he replied it needed "to get the editor who understands that issue".
"Good newspapers have to invest in writers.
"There is no point in having self-indulgence and people writing what they think is good.
"We need to have a front-page cover that people want to pick up and buy.
"The West has lost focus of what its customer is … and readers have stopped buying the newspaper.&
