It’s not hard to understand why Lachlan Murdoch can’t get $1.2 billion for his $3.3 billion Consolidated Media play with James Packer. The bid only benefits one person: Packer.

Packer stands to get 38% of the whole deal in cash and shares in Seek Ltd, or $1.254 billion, which is the amount of equity that Lachie and his supposed US backers were supposed to put into the deal.

And Packer gets to lift his stake from 38% to 50% for no money at risk: all the downside is with Murdoch and his backers, while Packer will share half the upside.

The bid won’t fly, it’s too expensive in the current climate and the assets being acquired are investments that do not represent cashflow, profits or control.

The thin excuses for the withdrawal by US fund manager, SPO, of a rising Australian dollar are just plain rubbish. The real story apparently is that they couldn’t get the access they wanted to PBL Media and CVC, were surprised at the level of debt in PBL Media and couldn’t see the sense in paying billions of dollars for two assets — 25% of Foxtel and 50% of Premier Media (Fox Sports) — that didn’t give any control.

Now Murdoch is off in the US beating the bushes. One of the groups mentioned is the Carlyle Private Equity group, but considering Carlyle won’t back its publicly listed Carlyle Capital Corp which missed four of seven margin calls on $US300 million in debt overnight. You’d have to say Lachie will struggle there.

It’s the second US bond investor sponsored by a big private equity group to effectively admit that it’s broke. Against this background, who is going to invest in a deal in Australia when the stuff is hitting the fan in the US?

So I wonder if Lachlan will go cap in hand to his dad or one of his banking mates and beg for a loan or three? Rupert reportedly didn’t want Lachie to bid, so what happens now? Ask Grandma to pay?

ConsMedia shares plunged when relisted this morning. They touched a low of $3.61 before bouncing back to $3.85, 45 cents or 10% down on Wednesday’s close.

Peter Fray

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