Lachlan Murdoch and James Packer in $3bn deal
January 23, 2008
Who would have thought the third generation of Australia two biggest competing media empires - the Murdochs and the Packers - would get together and launch a $3 billion takeover bid to take part of it public. Well, it happened today.
Lachlan Murdoch's Aussie media play
James Packer and Lachlan Murdoch are close to agreeing on terms that would privatise the remaining rump that is the Packer family's media empire, Consolidated Media Holdings told the ASX in this statement at 6.44pm on Monday night after a board meeting.
Nick Tabakoff broke the story at lunch-time today on The Australian's website, but it took another five hours before public confirmation arrived and even then the deal appears somewhat half-baked.
Lachlan and James are still to finalise terms with each other and Lachlan also needs to complete his own financing. However, there are some specific number with CMH shareholders to get $4.06 in cash, plus a distribution of shares in Seek which would lift the value to $4.80 - a hefty 24.3% premium to the last traded price of $3.86.
Stephen Bartholomeusz has some good early comment on Business Spectator.
The governance, regulatory and historical issues are all very interesting if Lachlan and James Packer do indeed emerge with a 50-50 privatisation deal that would see the portfolio of assets run by Lachlan as executive chairman.
The Packer and Murdoch families are both worth $7-8 billion - but this is the biggest deal they've ever done together.
CMH has no balance sheet debt and was capitalised at $2.66 billion based on the last traded price of $3.86. The Australian claimed that Lachlan Murdoch is financing his $1.4 billion-plus share independently of News Corp, which raises a number of interesting questions.
Is James Packer helping out with the financing as part of a final squaring off deal after the One-tel debacle, which cost News Corp $500 million and triggered Murdoch family calls for some compensation given everyone relied on James Packer's strong backing of One-Tel founder Jodee Rich. Remember Lachlan's famous evidence about James Packer crying in his kitchen and repeatedly apologising.
A more likely scenario is that the Murdoch family - not News Corp - has come to the party as was speculated in this piece on Crikey on December 10 last year. There has still been no explanation why the Murdoch family sold $US354 million worth of non-voting shares on November 15. I reckon the cash is going into this deal, which is designed to put Lachlan Murdoch back into the News Corp succession equation.
Lachlan fell out with News Corp's American executives in 2005 and didn't like the office politics, hence his resignation and return to Australia where he lives with his wife, model Sarah O'Hare, and their two children at Bronte on Sydney's southern beaches.
This new structure accommodates Lachlan's desire to live in Australia whilst getting him back into the fold. Rupert and his hard-running team in New York are in charge of North America, James Murdoch has a clear paddock to run Europe and Asia and now Lachlan is being given some Australian media assets to play with. Then again, the spin coming out of News appears to be that this is Lachlan's own deal and a statement of independence.
However, 50% of CMH is much smaller than News Corp's $5 billion-plus Australian empire, but privatisation of CMH wouldn't allow the mooted next step of backing News Corp's Australian assets into this vehicle.
Therefore, the big question is how the relationship between a privatised CMH and News Corp's Australian operations would work? Do they work together around the Foxtel board table and gang up on Telstra? Does Seek start working with News Ltd's struggling online classified businesses? It appears not because existing CMH shareholders will be distributed its Seek shares on a pro-rata basis as part of the deal, thereby reducing the value of what is being privatised by $550 million.
Given that News Corp already controls 65% of Australia's newspapers, 25% of Foxtel, more than 50% of realestate.com.au and various magazines, the idea that one of its directors and a son of its founder could suddenly invest $1.4 billion into even more Australian media assets is troubling, to say the least.
The ACCC and Communications Minister Stephen Conroy will have to have a good look at this deal. Surely, Lachlan Murdoch would have to quit the News Corp board, just as his brother is coming on after leaving BSkyB. James Murdoch quit the News Corp board when he first took up the post at BSkyB, although his father argued against this at the time.
The four adult Murdoch children were all together in Sydney over the new year, so the other interesting financing question is whether James, Elisabeth or Prudence are backing Lachlan, using some of the $US100 million of non-voting stock they were each gifted last year as part of the deal that allowed Rupert to give his two daughters to Wendi Deng a bigger slice of the inheritance cake.
One thing is for sure, I'm looking forward to the CMH shareholders meeting when all of this will be discussed because it is a scheme of arrangement that will go to a vote. It will certainly be a sad day to no longer have a chance to grill a Packer about media issues at an Australian AGM because it looks like he'll also be clearing off the board of Seek.com, where he is chairman.
Then again, there is always those gambling issues to raise at the Crown AGM. James Packer certainly didn't look happy about our exchanges at the big PBL demerger vote on November 23, as you can see from our 2007 AGM archive.
Here are the audio files of Stephen Mayne's radio interviews about 'Lachlan and James takeover':
- AM ABC Radio with Tony Eastley
- Sydney ABC Radio with Deborah Cameron
- ABC Radio 774 with Lindy Burn
- Radio 2UE with John Stanley
Do ya best, Stephen Mayne
The Mayne Report is published by Stephen Mayne and is primarily a paid newsletter delivered by email. Why not support our efforts by subscribing for just $1 a day. We all benefit from the public good that comes from properly resourced and executed shareholder activism. Alternatively, volunteer for an AGM, send us a corporate governance tip or contribute an item to stephen@maynereport.com.
Nick Tabakoff broke the story at lunch-time today on The Australian's website, but it took another five hours before public confirmation arrived and even then the deal appears somewhat half-baked.
Lachlan and James are still to finalise terms with each other and Lachlan also needs to complete his own financing. However, there are some specific number with CMH shareholders to get $4.06 in cash, plus a distribution of shares in Seek which would lift the value to $4.80 - a hefty 24.3% premium to the last traded price of $3.86.
Stephen Bartholomeusz has some good early comment on Business Spectator.
The governance, regulatory and historical issues are all very interesting if Lachlan and James Packer do indeed emerge with a 50-50 privatisation deal that would see the portfolio of assets run by Lachlan as executive chairman.
The Packer and Murdoch families are both worth $7-8 billion - but this is the biggest deal they've ever done together.
CMH has no balance sheet debt and was capitalised at $2.66 billion based on the last traded price of $3.86. The Australian claimed that Lachlan Murdoch is financing his $1.4 billion-plus share independently of News Corp, which raises a number of interesting questions.
Is James Packer helping out with the financing as part of a final squaring off deal after the One-tel debacle, which cost News Corp $500 million and triggered Murdoch family calls for some compensation given everyone relied on James Packer's strong backing of One-Tel founder Jodee Rich. Remember Lachlan's famous evidence about James Packer crying in his kitchen and repeatedly apologising.
A more likely scenario is that the Murdoch family - not News Corp - has come to the party as was speculated in this piece on Crikey on December 10 last year. There has still been no explanation why the Murdoch family sold $US354 million worth of non-voting shares on November 15. I reckon the cash is going into this deal, which is designed to put Lachlan Murdoch back into the News Corp succession equation.
Lachlan fell out with News Corp's American executives in 2005 and didn't like the office politics, hence his resignation and return to Australia where he lives with his wife, model Sarah O'Hare, and their two children at Bronte on Sydney's southern beaches.
This new structure accommodates Lachlan's desire to live in Australia whilst getting him back into the fold. Rupert and his hard-running team in New York are in charge of North America, James Murdoch has a clear paddock to run Europe and Asia and now Lachlan is being given some Australian media assets to play with. Then again, the spin coming out of News appears to be that this is Lachlan's own deal and a statement of independence.
However, 50% of CMH is much smaller than News Corp's $5 billion-plus Australian empire, but privatisation of CMH wouldn't allow the mooted next step of backing News Corp's Australian assets into this vehicle.
Therefore, the big question is how the relationship between a privatised CMH and News Corp's Australian operations would work? Do they work together around the Foxtel board table and gang up on Telstra? Does Seek start working with News Ltd's struggling online classified businesses? It appears not because existing CMH shareholders will be distributed its Seek shares on a pro-rata basis as part of the deal, thereby reducing the value of what is being privatised by $550 million.
Given that News Corp already controls 65% of Australia's newspapers, 25% of Foxtel, more than 50% of realestate.com.au and various magazines, the idea that one of its directors and a son of its founder could suddenly invest $1.4 billion into even more Australian media assets is troubling, to say the least.
The ACCC and Communications Minister Stephen Conroy will have to have a good look at this deal. Surely, Lachlan Murdoch would have to quit the News Corp board, just as his brother is coming on after leaving BSkyB. James Murdoch quit the News Corp board when he first took up the post at BSkyB, although his father argued against this at the time.
The four adult Murdoch children were all together in Sydney over the new year, so the other interesting financing question is whether James, Elisabeth or Prudence are backing Lachlan, using some of the $US100 million of non-voting stock they were each gifted last year as part of the deal that allowed Rupert to give his two daughters to Wendi Deng a bigger slice of the inheritance cake.
One thing is for sure, I'm looking forward to the CMH shareholders meeting when all of this will be discussed because it is a scheme of arrangement that will go to a vote. It will certainly be a sad day to no longer have a chance to grill a Packer about media issues at an Australian AGM because it looks like he'll also be clearing off the board of Seek.com, where he is chairman.
Then again, there is always those gambling issues to raise at the Crown AGM. James Packer certainly didn't look happy about our exchanges at the big PBL demerger vote on November 23, as you can see from our 2007 AGM archive.
Here are the audio files of Stephen Mayne's radio interviews about 'Lachlan and James takeover':
- AM ABC Radio with Tony Eastley
- Sydney ABC Radio with Deborah Cameron
- ABC Radio 774 with Lindy Burn
- Radio 2UE with John Stanley
Do ya best, Stephen Mayne
The Mayne Report is published by Stephen Mayne and is primarily a paid newsletter delivered by email. Why not support our efforts by subscribing for just $1 a day. We all benefit from the public good that comes from properly resourced and executed shareholder activism. Alternatively, volunteer for an AGM, send us a corporate governance tip or contribute an item to stephen@maynereport.com.