The dilution of John B Fairfax’s 53.5% stake in Rural Press down to a 13.5% stake in the enlarged Fairfax Media group marks an important milestone in Australian corporate history.

Once the takeover is complete, there will no company in the top 100 which features a single family shareholder as the majority owner.

However, that doesn’t mean John B Fairfax’s family won’t be able to control Fairfax Media with just 13.5%.

After all, Rupert Murdoch controls News Corporation with an economic interest of just 11%, although he does own 29% of the voting stock thanks to a gerrymander that doesn’t give a majority of the shares any voting entitlement.

Similarly, James Packer will remain firmly in control of PBL Media, even though the recent private equity deal dilutes the family’s ownership of ACP and Channel Nine down to about 19%.

The same goes for Kerry Stokes who is selling half of his media interests to private equity investors and therefore dropping his direct exposure in Seven from 43% to 21.75%.

Whilst the likes of Terry McCrann are still talking up the prospect of the $9 billion enlarged Fairfax Media group being taken over, it is difficult to see it happening.

Once the Fairfax family is ensconced with 13.5%, they will be very hard to move and why would Kerry Stokes or Rupert Murdoch sell their combined 7% of the enlarged group to a rival bidder anyway?

There could well be a tussle over board control and it does make sense for John B Fairfax to succeed Ron Walker when his three year term expires just after his 70th birthday in 2009.

John B Fairfax and his brother Timothy, who could be the second Rural Press representative on the Fairfax Media board, are now estimated to be worth about $1.5 billion. They’re about to pocket more than $300 million in cash and special dividends and could easily plough some of this back into the company, lifting their stake closer to 20%.

At that point it would be game over for all predators and given the experience with your Warwick in 1987, it would be hard to imagine the Fairfax brothers agreeing to sell a second time.

Peter Fray

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