Whatever’s on the mind of media and mining mogul Kerry Stokes, a bid for Fairfax is clearly the farthest thing from it. In the past fortnight we’ve had news of a $400 million-odd play for distressed oil and gas explorer Nexus Energy by Seven Group Holdings, and now a mooted 200-300-pound bid for Britain’s bottom-ranked free-to-air TV network, Channel 5, by Seven West Media.
Going by recent share price movements, the market is not enthused by either deal. Stokes’ empire is like a pyramid, topped by the wholly owned, unlisted Australian Capital Equity, which owns two-thirds of the listed Seven Group Holdings, which in turn owns one-third of the listed Seven West Media, owner of the country’s leading free-to-air TV network. It’s fair to say the most risk is in the bottom layer, where less of Stokes’ wealth is tied up.
Famously, Stokes hates paying a control premium, preferring to creep on targets — witness his slow-bake takeover of then-listed WA News, owner of The West Australian newspaper. So fresh speculation this week about a bid for Fairfax appears flimsy, regardless of whether Communications Minister Malcolm Turnbull succeeds in deregulating media ownership this year.
Stokes prefers distressed assets, and they don’t come much more distressed than Nexus Energy, which was almost certainly going broke until Seven Group’s bid was unveiled on March 31.
Conveniently, Stokes’ hand-picked Seven Group chief executive, Don Voelte — the former boss of Woodside who joined him in July 2013 — happened to be chairman of Nexus.
The scheme documentation released to the ASX reveals Nexus knew of Seven’s looming bid last December. On February 13, Nexus denied a report in The Australian of a possible bid from Shell or ConocoPhillips, but conceded it was “actively engaged with a number of third parties” as part of a strategic review. Five days later Nexus went on a trading halt and Voelte resigned as Nexus chairman, after 18 months, citing Seven Group Holdings’ “strategic interest in the oil and gas sector”.
Was Voelte conflicted? When the Seven Group bid was finally revealed in March, Nexus chief Lucia Della Martina said Voelte had recused himself at board meetings when the Seven bid was first discussed, and offered his resignation which was rejected. Given everything else going on at Nexus — namely, an outage at its Longtom platform in Bass Strait, a dispute with supplier Sedco, a yawning gulf between stated asset backing and the share price of 6c, and a looming debt repayment the company couldn’t meet — there seems little appetite to bother about governance scruples, which would amount to looking a gift horse in the mouth. It seems the alternative to Seven’s bid is oblivion.
Though Nexus investors have lost the best part of a billion dollars over the past five years, rumours that class action lawyers are sizing up a case appear unfounded. There is not much money in it, and the grounds are unclear even though it could work out nicely for Voelte’s boss, that Nexus slid towards oblivion on his watch. Nexus remains on a trading halt, and investors are stuck waiting for the release of an independent expert’s report on the Seven Group bid, priced at 2c a share, with no sign of a rival.
The UK’s Channel Five, owned by British media tycoon Richard Desmond and offered for sale at an expected $1.2 billion, is also a turnaround story. Channel Five manages to be profitable, according to analysts, but has consistently ranked a distant third in audience and revenue share behind ITV and Channel Four. Over the last two days, The Australian has linked a mooted bid for Channel Five to Seven’s court battle with Channel Ten over the failed attempt to poach programmer John Stephens. Seven’s affidavit shows Stephens was lured back by offering him an international role.
Crikey understands Seven does have a copy of the Channel Five information memorandum — as do a long list of media companies, no doubt — but is unlikely to bid, even at the bargain price of 300 million pounds.
BRW‘s latest executive rich list shows Stokes’ wealth dropped by a quarter to $1.8 billion over the past year, hit hard by the mining services downturn. Rupert Murdoch — with $12.6 billion in the bank — has finally sorted his succession, appointing Lachlan as chairman of News Corporation and 21st Century Fox. James Packer’s wealth has soared 44% to $6.4 billion, on the back of Crown and a well-timed exit from his family’s media assets. Relatively speaking, Stokes is starting to look pressured.
Interesting looking at Stokes strategy if you believe what has been a long term rumour in WA – that Stokes is a front man for a Murdoch financed media play.