On the strength of PBL’s leaks to the AFR today, the big private equity funds of KKR and Newbridge could be shaping up as James Packer’s Alan Bond – paying top price for media assets at the top of the market while leaving the door open for James to take back control.

Of course, Packer isn’t really losing control in this Claytons sell-off. The private equiteers are ponying up $4 billion or more for half the media business while JP and John Alexander keep the power and influence.

The deal only makes sense for the foreigners if they can extract a capital profit (tax-free thanks to the CGT changes) which requires the media business to substantially appreciate.

Organically, that’s hard to see. Bartho in the Smage takes the most optimistic view of Channel Nine’s worth and still doesn’t come up with a growth scenario, only a well-protected status quo for the medium term. The ACP magazine business is running at its most cost-pared with mags facing many of the internet challenges more often talked about in relation to newspapers. A very different view of the magazine business might be provided by what the Hannan family eventually gets for its FPC Magazines currently up for auction – not much.

With the main two businesses therefore looking very fully priced, there’s the blue sky, or simply uncertainty, of what goes into the deal from cable and the net. It’s hardly compelling.

The alternative growth path would be via acquisition – with the private equiteers providing relatively easy money with which PBL could win control of Fairfax. Helen Coonan’s hilarious media changes mean that the one company (controlled by JP and JA) can indeed have FTA TV, cable, magazines, newspapers and the internet – leaving out just radio which they wouldn’t want anyway.

If you were selling a growth story to a bunch of foreign investors, that would seem a greater possibility. Or you could just take them for a ride. That’s been done before as well.

Peter Fray

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