From gambit to endgame, Stokes stalks Packer
Sydney Morning Herald
Saturday September 12, 2009
THE truce between Kerry Stokes and James Packer that gives Stokes's Seven Network two seats on the board of Packer's Consolidated Media is both a recognition of reality and an instalment in a longer game.Stokes waded into the market to take a 19.9 per cent stake in ConsMedia because he is a media junkie and he believes Packer is not. Despite the speculation that his raid on ConsMedia would spark a head-to-head brawl, their relative strengths always suggested that Stokes had to bide his time.Packer was under short-term pressure as he booked losses on the casino expansion in the United States and Macau he has been running through his other listed vehicle, Crown. Stokes may have thought this presented a short-term opening to elbow his way into ConsMedia, which has pay-television interests that he has long admired: a 25 per cent stake in the Foxtel pay-TV business and a half share of Premier Media, which supplies the Fox Sports pay channels.The odds always were that Packer would not retreat, however, and that was confirmed quickly when Packer used takeover creep provisions of the Corporations Act to boost his stake in the media investment company by 3 per cent to just under 41 per cent.ConsMedia then sold its 26 per cent stake in the online classifieds group Seek for $441 million, and announced its intention to stage a share buyback that will boost Packer's stake to 45 per cent if he does not participate. Stokes's holding will also rise if he does sell into the buyback, to about 22 per cent, but that still leaves the two in a stalemate.Neither can take complete control of ConsMedia without the other agreeing to sell and the bill for a clean-up bid would be substantial for either magnate given that ConsMedia has a market value of $2.1 billion.The deal they have struck recognises this and postpones the endgame rather than axing it: Packer will have three nominees on the board to Stokes's two and Seven will not add to its holding in the next 12 months without obtaining permission from the board. This gives both sides a year to ponder the next stage and Stokes will reckon that time is on his side.His long-term bet is that Packer is much more interested in the casino business than media and, in a financial sense, more committed.And he can afford to wait to see whether he is right: Seven sold half of its television network to the private equity group Kohlberg Kravis Roberts for a net $3.3 billion in 2006.It has been on an investment spree since, but is still sitting on nearly $1 billion in cash after buying into ConsMedia.
© 2009 Sydney Morning Herald