The AFR’s Damon Kitney was given a detailed briefing on the PBL media demerger deal with a private equity consortium and comprehensively scooped his rivals this morning.
This left the ASX with no choice but to suspend PBL shares and we’re now just waiting for the formal announcement which is expected later today or tomorrow. Having put together Australia’s highest-powered corporate board after his father’s death, James Packer is making a very shrewd move.
He cannot afford to surrender the real and implied power that comes from controlling Channel Nine in Melbourne, Sydney and Brisbane, but the magazine and television assets are old-world and low-growth.
So it makes sense to capitalise on the Packer name for great deal-making, the bubble in media stock prices based around John Howard’s legislation, and the well of private equity capital looking for a home to unbundle PBL’s gaming and media assets whilst selling some of the media equity for a huge price.
There’s no need for James Packer to actually own 37% of PBL to enjoy all that media power. Just look at the Murdochs and BSkyB, where Rupert is chairman and James Murdoch is CEO, yet the family only has an economic interest of about 6%.
Therefore, if UBS can come up with a private equity consortium led by KKR which is prepared to pay $3 billion for a 50-60% stake in the media assets, it’s a great result for the Packers and they’ll retain all that power and access to any further upside from future merger deals.
One of the potential downsides from this deal would be a reduction of information about Australia’s most prestigious media asset portfolio if they are housed in an unlisted vehicle.
However, the private equity investors will be looking to relist the vehicle by 2010, after bedding down a wave of mergers and takeovers courtesy of media ownership deregulation.
The fine detail of this deal will be fascinating to watch. Are all the investments being shifted over including online properties such as Seek and Ninemsn? What does it mean for Foxtel and Fox Sports and who will run the business?
Similarly, just how much deeper into the global casino business are the Packers planning to dive? They’ve already committed almost $4 billion and that is growing in places like Singapore, Macau, the UK and even Russia.
Stay tuned for one of the corporate stories of the year and book your tickets to Sydney for the PBL AGM on Thursday, 26 October.