The Ten Network is in deep despair with an enormous job for new CEO Hamish McLennan ahead. So why is the company firing off legal letters around commentary of its woes?
When the corporate history of Network Ten comes to be written, the theatrics of the James Packer/Lachlan Murdoch-led takeover of the past two years will be characterised as a sad and sorry chapter.
In an industry full of aggressive blokes, you can only wonder what it must be like sitting inside a boardroom full of billionaires led by the perennially disappointing Murdoch. Young Lachlan has never taken kindly to criticism, but his ability to bring the Ten board with him on various unusual frolics has surprised even seasoned observers.
Indeed, management at Fairfax Media was taken aback three weeks ago when the entire Network Ten board, excluding their own director Jack Cowin, fired off an extraordinary legal threat over a fairly ho hum letter of mine that was published by The Australian Financial Review. The issue was Ten’s latest heavily dilutive capital raising, which failed to compensate retail shareholders who didn’t participate and didn’t allow other retail shareholders the opportunity to buy these rejected entitlements.
You’d think Ten directors would have plenty on their plate as Ten’s ratings and revenue share hit record lows, but no, they all conferred and signed off on launching a heavy handed legal threat against Fairfax, including a demand for $100,000, an apology and removal of the Australian Shareholders’ Association commentary from the public domain.
Ousted CEO James Warburton was even roped in to have his name associated with a legal threat. Three weeks later and the board has clearly split, with all legal guns now focusing on the fired CEO.
Warburton might make for an entertaining witness if Ten’s new CEO Hamish McLennan decides it is worth spending more shareholder funds pursuing Fairfax through the courts.
I’ve seen plenty of overblown legal threats in my time, but the Lachlan-led effort was one for the ages. The hand-delivered letter from Gilbert + Tobin claimed Fairfax was alleging all these venerable Ten directors had “engaged in reprehensible, criminal or otherwise unlawful conduct”.
No at all. The ASA was simply commenting that Ten should have followed the lead of Fairfax Media’s own three-for-five entitlement offer in 2009 which raised $623 million, including $23 million from participating retail investors who applied for extra shares left on the table by their non-participating retail colleagues.
“The Ten directors negotiated a deal where these 80 million new shares were literally given away to the well-paid underwriter and its unknown institutional clients ….”
The Ten offer was strongly in the money but the thousands of retail shareholders who declined to take up $16 million worth of new shares at 20c were not offered any compensation courtesy of a book build of the shortfall. The likes of Rio Tinto, Transpacific Industries, Alumina, Sigma Pharmaceutical, Australand, FKP, Alliance Resources, ALE Property Group and Orica have all offered such a sale and compensation facility when raising capital in recent years.
Instead, the Ten directors negotiated a deal where these 80 million new shares were literally given away to the well-paid underwriter and its unknown institutional clients who have, based on Friday’s closing price of 29.5c, pocketed paper profits of $7.6 million.
Here’s hoping the entire Ten board won’t be roped into making more legal threats over this claim. But in my opinion Murdoch is a major part of the problem at Ten and should be treated in the same way he dealt with Nick Falloon, Grant Blackley and Warburton — summarily sacked.
For starters, the Murdoch family is pushing the envelope like never before in terms of the reach of their influence in the Australian market. McLennan can’t possibly claim he has resigned from the Murdoch empire when both Ten and News Limited have quite openly declared they he will continue to represent News Corporation’s controlling stake in REA Group as chairman of the company.
Media regulation in Australia has long been a joke, but nothing beats the past 18 months when the Murdochs have supposedly been on the back foot over industrial-scale criminality in the UK. Rather, News Corp has been allowed to buy Austar and Consolidated Media Holdings to establish a pay TV monopoly, while Lachlan has effectively taken over Ten and moved to 100% control of radio play DMG.
And now you even have Ten outsourcing the production of its flagship political show, Meet ThePress, to News Ltd.
The AFR’s coverage today suggests the Gillard government and the various competition regulators are not going to sit back passively this time. At the very least, Lachlan should be required to resign from the News Corp board and McLennan should resign immediately as chairman of REA Group.
And the Ten board should apologise to Fairfax and the ASA for so brazenly attempting to muzzle free speech by shutting down legitimate commentary about a public company capital raising.
*Stephen Mayne is policy and engagement co-ordinator for the Australian Shareholders’ Association