Shareholders in West Australian Newspaper have clearly lost tens of
millions after buying a 50% stake in the Hoyts cinema chain from Kerry
Packer’s private company for $173.5 million in January 2005.

The disaster move was there for the world to see in yesterday’s
half year result in which Hoyts contributed just $4.9 million to
earnings. The deal is only 12 months old, yet already the forecasts are
way off track. So much for the predicted lift in earnings from $55.3
million in calendar year 2004 to $67.2 million in 2005. After the miserable
December half, the new forecast for the 2005-06 financial year is for
earnings of just $24.4 million.

Sure, 2005 was a tough year at the box office for everyone, but
diversifying from newspapers to cinema was always a strange move and
now Law has been poached by PBL in what cynics reckon looks like a
thank-you from the Packers.

It was always a little odd that Packer’s private interests bought Hoyts
for $600 million in 2000 given that it was the public company, PBL,
that held the earlier investment in Village Roadshow.

Despite PR spin to the contrary, it turned out to be a bad move and
Kerry Packer sensibly decided to offload Hoyts. PBL was always an
obvious buyer but this would have been a large and controversial
related party transaction, so the Packers needed to find an independent
third party to agree to the price and take up a 50% stake.

Step forward Ian Law and WA News. Given the disaster that has unfolded,
the WA News board has every right to be outraged that Law has the
temerity to then run off a take up a lucrative job offer from the
Packers. Rather than presenting yesterday’s results, the board should
have punted Law on the very day his defection was announced. It all
looks very grubby.