The stalking of Fairfax continues, with News Ltd papers reporting today that Kerry Stokes’ media empire has picked up a small stake. The move means that Stokes and Murdoch – who picked up a 7.5% stake in October – will either clash in a mad rush for control, or do a backroom deal.

So what does Stokes have that Murdoch might want? The only really disposable asset would be Pacific Magazines, now about to be stuffed into Seven Media Group.

Murdoch owns around $395 million worth of Fairfax shares and if he traded those to Stokes, he would need a cash top-up for Pacific.

But Pacific is a core asset, so the other asset that would have to be traded is the 14.9% of West Australian Newspapers that Stokes has his foot on. It cost around $340 million.

Murdoch doesn’t have a daily paper in Perth, only a Sunday and half of a joint venture with West Australian Newspapers in some suburban papers.

Seven’s Fairfax stake is less than 5%, but more than Fairfax thinks it is. A Fairfax spokesman was quoted in The Australian today as saying that the Stokes stake “would be less than 2 per cent.”

The stake is held in Seven Network Ltd, not the new company that will be half-owned by KKR.

It’s more than that because added to the Murdoch stake, the combined holding would be enough to stop Fairfax doing anything without the approval of the two media moguls, while the size of the two stakes also offers one of them the chance of putting together a blocking stake by buying out the other.

Murdoch can’t do anything with his stake except block Fairfax: there’s more upside in it for Stokes in owning or controlling Fairfax than there is for News.

The only hitch is that the Federal Government and the Communications Minister, Senator Helen Coonan, won’t even discuss the timing of the proclamation of the legislation next year.

Some media companies claim the Government is now “punishing” the sector for making fools of the Minister and the Prime Minister, who both doubted their new media laws would lead to much corporate activity.

It has with the Seven and PBL deals both done under the old legislation, but the private equity groups can’t really crystallise their stakes into direct holdings until the legislation is proclaimed.

The government has to resolve the thorny question of definition of local content in regional radio before the new act is proclaimed, plus sort out the details of the new digital channels.

The Ten Network is another group waiting for the proclamation date to be set so its Canadian owners can regularise their grandfathered shareholding into a majority of the ordinary shares in the company.