SYDNEY — An uneasy quiet has settled over James Packer’s Consolidated Media Holdings after a A$260 million ($212 million) share raid by rival media mogul Kerry Stokes initiated a flurry of trading activity.
Stokes, majority shareholder of the Seven Network, last week took a 19.9% share in CMH, which owns 25% of paybox Foxtel, 50% of feevee channel producer Premier Media Group and 0.07% of PBL Media, which includes the Nine Network.
In response, Packer shelled out $40.7 million to up his stake to 40.8%, effectively preventing Stokes from a quiet takeover. If the Seven topper wants control of the media org now, he will have to launch a hostile bid.
So there they sit on the share registry, staring each other down; you can almost hear the Ennio Morricone soundtrack in the background.
Much has been made in the local media about Stokes’ motives for the investment — getting a foot in the door of the now-burgeoning feevee industry via Foxtel or agitating for a board seat on the company that owns rival channel Nine.
Both moves have merit, particularly when Foxtel, under the stewardship of Kim Williams, has seen subscriber growth despite the weak market and looks set to announce revenues of $1.2 billion in its August results for the fiscal year, which ended June 30. Free-to-air can only wish for such figures.
But what is more curious is Packer’s new-found attachment to an asset he virtually washed his hands of in 2007, when he sold a large chunk to private equity firm CVC, effectively ending his family’s dominance in Australian media.
One reason could be that casinos and gaming — a side of the family business that Packer favored despite his father Kerry’s love of media — has treated him about as kindly as it does any Vegas tyro.
His roll of the dice on gaming in Macau, Melco Crown Entertainment, recently posted a 55% drop in revenue, the third consecutive quarter of negative year-on-year results for the venture. Stateside, his Crown Group, which bought into Station Casinos and Harrah’s Entertainment in Las Vegas, has racked up losses to the tune of $650 million.
That is enough to give anyone a nostalgic yen for media stocks.
Andrew Anagnostellis, media analyst with Deutsche Bank, argues the move is a natural one.
“The company he has a controlling share in is under attack, so there is a lot of positioning to get the best (share) price,” he says. “I don’t think he is suddenly in love with media again.”
But there’s likely one more factor at play — there is no love lost between Packer and Stokes. And one reason for that is born out of one of Australia’s largest corporate litigation cases.
In 2007 Stokes accused Packer and Foxtel, among other media and sports orgs, of colluding to kill off his C7 pay TV sports channel in a $160 million suit that became known as “Seven vs. the world” because Stokes took on so many groups.
“It doesn’t help that Stokes has sued virtually everyone in the media,” says Anagnostellis. “It becomes personal and makes it harder to get a purely financial outcome, and it makes it a lot more interesting.”
The raid on CMH means that Stokes is positioning himself to own a large stake in the very company that he believes thwarted his feevee ambitions in the past — achieving by investment what litigation could not provide.
And Packer, whom Stokes named directly in his lawsuit and who was reportedly livid about the ensuing bad press, seems determined, once again, to stop him.
But Stokes should not be written off.
Anagnostellis says: “He tried his own channel and content with C7, he tried litigation — pay TV is where he wants to be.”