The question remains, who benefits the most from Kerry Stokes’ WesTrac shuffle?

There are doubts about valuations, but it’s clear the winner will be Stokes, who gets 68% of the new company, and not the current majority shareholders of Seven Network Ltd, who will become a minority in the new company.

That’s why there was an initial negative market reaction. Seven shares fell 5% on Monday after the announcement. That fall increased the premium in the deal on offer in the deal. The transaction puts a value of $8.70 on the Seven shares.

In other words, Seven (or Seven Group Holdings) would buy WesTrac without paying a control premium but issue stock at a premium to reflect the increase in Stokes’ interest to 68%.

The shares fell by more than 7% at one stage as investors assessed the deal as very kind to Stokes, and perhaps not to Seven Network shareholders. The reason the premium is on offer to Seven shareholders is simple: they deserve one and it will be the only way to win approval of the 52% of the company not controlled by Stokes (with two shareholders controlling around half of that between them).

There is a feeling that on the issue of control, Stokes has form. That’s why they don’t appreciate the fact that Stokes would be tightening his hold on the the Seven Network, and positioning himself for further expansion in the next couple of years, at the expense of Seven network’s $1 billion-plus cash pile.

Investors remember how Stokes snuck up through the Seven register to control it by using the creeping acquisition method of just under 3% every six months. That way he paid no premium to other shareholders for control.

He has then further boosted his holding in Seven through the company running share buybacks and allowing his stake to rise. Unfortunately, non-Stokes shareholders in Seven Network know that if they vote down the deal, then that’s probably what Stokes will do.

He has done one “creep”; at West Australian Newspapers to boost his stake to 22%. By creeping, he avoids (as do others who use the method, such as James Packer and Stokes in Consolidated Media) having to launch an offer once he goes over 20%.

What also upsets some shareholders is that $600 million of the cash pile will go into repay a loan held by WesTrac. And there’s also a very large uncrystallised tax bill that could top $600 million by later this year.

And Stokes and Seven upset investors in 2007-2008 by taking much of the cash liberated from the sale of the media business into the the KKR joint venture, and then investing it at the top of the market and seeing big capital losses eventuate.

The WesTrac assets, cash flow and earnings will make Seven a much more formidable company in Australia. But there’s another question. Why not just float WesTrac as a standalone business and keep control? The answer to that is Caterpillar (or the 1000-pound dozer in the back of the room).

WesTrac is a top-five Caterpillar distributor globally, dominating Australia and north-eastern China. There are no formal agreements between the two companies, it is based on experience, longevity and performance. Caterpillar, however, does require its distributor principals to control at least 60% of the company. Listing WesTrac would open up the possibility for that control to be weakened or attacked. That then might see the franchise lost.

And that raises two further questions. Caterpillar effectively controls the fate of WesTrac and the merged company, if the deal goes ahead. That is a reason to treat WesTrac and the company as a more speculative investment. That will be revealed in a lower share price if and when the deal is done. The higher rating sought by Seven and Stokes won’t be achieved for that reason.

And, there’s the question of Seven’s news and current affairs programs and its magazines.

Even though Stokes controls Seven, it is in direct to his Chinese investments through his private company, ACE. This deal changes that and brings Seven News, Today Tonight, Sunday Night and perhaps even the odd magazine into the direct China relationship Stokes has established.

So if Seven news, TT or Sunday Night (or even New Idea), choose to interview the Dalai Lama, or some representative of Chinese dissidents, or to do any sort of story that China takes offence to (and they take offence to quite a lot these days), then what happens to editorial independence.

It’s an area that will have to be watched. There’s the continuing Tibet problem, the fallout from the unrest in Zinjian province. The ABC has been accused of delaying the telecasting of a doco on a Uighur leader, Rebiya Kadee.

So far there’s no evidence of Seven running dead on Chinese coverage (its minor anyway and mostly on the news). But the Chinese, when it suits them, do not understand democracy and freedom of the press, especially when they deal with wealthy and powerful foreigners.

And Stokes does have form in this area. Remember Today Tonight, Jill Singer and a story on Jeff Kennett back in the 1990s.