How the AFR and its editor Glenn Purge were scooped by The Australian, and left looking slightly silly by the Southcorp dealings.
It’s not often that the country’s most expensive daily newspaper and one of the world’s most expensive financial newspapers has egg on its face.
But that’s what The Australian Financial Review is experiencing at the moment with it now in full catch-up mode on the first two big deals of 2005.
These are: the flirtation between Ten and Fairfax, publisher of the AFR, and the Oatley sale of its stake in Southcorp to Fosters and subsequent negotiations between the two liquor companies that may produce a bid by Monday.
All media outlets missed the Fosters-Southcorp shuffling, mainly because the Oatley sale was done straight to Fosters and the involvement of the investment banks and advisers, with their group of media favourites on the drip, was minimal.
The Ten-Fairfax story broke in the News Ltd press (The Australian) simply because News was approached and said no. You can bet that if News Ltd had have said yes, the lid would have been on until the deal was done, then it would have been leaked to the in-house commentators.
But if Fairfax had said no, then who knows where it would have appeared.
But what is certain is that the AFR and its editor Glenn Purge were scooped by The Australian, and left looking slightly silly by the Southcorp dealings.
After all, the fill-in Chanticleer, Anthony Hughes, a Purge favourite, had devoted Wednesday’s column to Southcorp under the good headline, “Southcorp: ripe for plucking”.
Sure was. But Hughes accepted at face value the statements from Fosters management that the company was interested in making its Beringer Blass business more efficient and profitable.
Hughes nicely outlined how Bob Oatley had sold Rosemount to Southcorp for less than foreign bids in early 2001 and it would appear this is what he has done again in selling the family’s stake for $4.17, below the effective entry price of $5.95(but there was a lot of cash in the original deal, enough to pay $200 million for Hamilton Island).
He didn’t ask what if this happens again?
The AFR meanwhile covered itself, or rather covered both stories in its usual ‘shoot every angle till nothing survives’ including starting the Fairfax-Ten story with an anecdote about boat trips on Sydney Harbour on Boxing Day and the new CEO of Fairfax, Doug Flynn.
The AFR unconsciously confirmed that the Westfield faction still runs Fairfax by disclosing the boat trip was on Frank Lowy’s gin palace on Sydney Harbour, with Fairfax CEO and Westfield director Fred Hilmer there and his Fairfax chairman and fellow Westfield director, Dean Wills also along for the trip and chat.
There’s a special Fairfax board meeting on Monday, ostensibly to discuss the new CEO’s confirmation and maybe a deal with Ten. So where will that be held, Westfield Bondi Junction?
David Gonski will be there. The man, who as head of Lowy’s Westfield Capital put the mall magnate into TV and then had to extract him after huge losses.
Gonski was also the man who worked out how Conrad Black could put a foot on Fairfax through Tourang, and then used the same sort of structure and thinking to allow the Aspers to take Westpac out of Ten(because Kerry Packer was a board member and shareholder in Westpac).
Gonski is about to depart the Fairfax board and this sort of deal would crown a remarkable set of corporate conjunctions.
Gonski’s long time workmate Geoff Levy is a director at Ten, so the discussions could have even been done by mental telepathy, such is the closeness of the two men and Gonski’s knowledge of Ten and Fairfax.
But reading the AFR story readers were left with the feeling that this was a catch-up.
A handy help would have been to outline in detail David Gonski’s central role in the lives of Fairfax and Ten since 1988.
Gonski knows the Aspers and Canwest, knows Fairfax intimately. He could have handled the whole series of contacts by himself!
Clearly no one at Fairfax or Ten was talking that closely to the nation’s business bible, or anyone else for that matter.
There have been some highly ill-informed comments from analysts, no doubt smarting, like Glenn Purge, that the first possible deal/combination in the media area has slipped under their radar.
For example some have wondered if Nick Falloon would make any difference, with “he can’t do two jobs (ie. run newspapers and TV)”. Nope, he can’t, but John McAlpine has run Ten’s TV business very well, helped by programmer David Mott.
It would be up to him to find someone who can run newspapers and who would report to him and the board.
Unlike Hilmer, Falloon doesn’t need to work. He has $32 million worth of Ten shares, millions from working at PBL in superannuation and other benefits, and if he has kept the 1.5 million shares in PBL he had at the time, would be worth another $25 million.
Having that sort of money, especially at Ten and possibly at Fairfax, would make for an independent way of thinking.
Falloon’s role at Ten is also not understood by some analysts.
It is one of the easiest jobs in the Australian media. He was hired 11 months after being sacked by James Packer in early 2001.
The Asper family, Ten’s controlling shareholder, wanted a good media executive with strong financial skills, to take charge and fix up the disaster that was EyeCorp. Ten had paid something like $165 million for a business, that after the write-downs Falloon drove, was valued at $5 million-$10 million.
He made sure the management was in place at EyeCorp (Gerry Thorley) who understood that the only way up ‘up’ or ‘out’ and made sure John McAlpine understood that he had to run the TV business, which he has done and is the best TV executive in the country.
That’s why any acquisition of Ten by Fairfax would bring a good and experienced management team in growth businesses. Fairfax’s newspapers are declining.
The falling circulations of the SMH, the AFR, the Sun Herald (and I know The Age has picked up, but it is only back to where it was a decade ago) and the falling readership point to an implosion down the track.
The drain out of classified is ongoing and is adding to the pressure.
The New Zealand buy was a pretty good deal and has stabilised the bottom line.
But for those precious luvvies among the SMH journalists and house union who worry about Tabloid Ten and the lack of synergy, then they should look again.
The people running Ten know more about the media business and how to work assets and drive earnings than anyone at Fairfax.
Yes there was a playing down, but no denial, so why didn’t they say more to the ASX, and why hasn’t the ASK asked for more detail?