Lachlan Murdoch’s attempt to restart his career appears to have failed after James Packer changed his mind on a joint bid for Consolidated Media Holdings.

Shares in Cons Media were placed in a trading halt this morning pending an announcement over the future of the Murdoch/Packer buyout of the company. That announcement is expected this afternoon.

Murdoch and Packer revealed their plans for a joint bid, which valued Cons Media (in which Packer owns 38%) at $3.2 billion or around $4.70 to $4.80 a share, back on January 21.

But the credit crunch sank the first attempt by forcing Lachlan’s financiers, a San Francisco fund manager, to depart the deal. It was claimed volatility in the Australian dollar had created problems, but the reality was the US group had gotten cold feet and withdrew.

Lachlan went in search of other backers and found Providence Partners, which had tried to team up with Sir Tony O’Reilly to takeout the shares he didn’t own in APN News and Media, but that deal fell over because the share price was considered to be too skinny.

When Murdoch revealed his new attempt last week, it also emerged that James Packer had changed his mind. He no longer wanted to be a partner of the deal; he only wanted to have a 25% stake and wanted $4.80 share cash for the 13% stake he was selling.

That would have meant him and his Cons Press Group receiving a gross payment of around $700 million from Lachlan and his backers. But Providence Equity didn’t want to pay $4.80 a share: they thought a total price of around $4.60 was better value in cash and shares in Seek Ltd, which is 27% controlled on Cons Media.

Packer’s decision to cut his involvement to being a minority shareholder effectively undermined the credibility of the offer from Murdoch.

Australian investors have learned to be wary when the Packers are sellers and want cash and a reduced involvement in the deal.

There are also suggestions in the market that Packer’s Cons Press group has a big debt repayment to be rolled over or repaid later this year, while the Crown gambling business needs cash to maintain its aggressive expansion plans overseas.

Part of the problem is that Lachlan Murdoch can only find $50 million in capital from his own resources. Providence was being asked to put in $2 billion in debt, while the bank debt from the ANZ can’t be much higher than $750-$800 million because that’s all the cash flow out of the 50% stake Cons Media has in Premier Media Group (Fox Sports) can support.

If the deal has foundered Packer’s decision to reduce his involvement will be seen as the key reason and perhaps also as revenge for News Ltd pulling the plug on One.Tel all those years ago.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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