As the Sun King flies into Australia to deliver the ABC Boyer lectures, the planets may be aligning to allow him to make one final major play in his home country.

The financial problems and the fall in share prices facing the private equity holders in the commercial FTA networks and CMH now provide a unique opportunity for Murdoch to take a role in the restructuring of the Australian media industry.

The Sun King has major international investments in film with 20th Century Fox, Pay TV holdings in the UK, US, Germany, NZ, Italy and Australia, TV channels in the US, cable network programming with international channels including Fox News and Fox Business, magazines and newspapers including Dow Jones and The Wall Street Journal.

However, Australia has been a disappointment and now forms less than five per cent of News Corp interests. It has been a frustrating market since Murdoch sold out of Ten in the mid 80’s to become an American citizen. His newspapers have fought against industry trends, he was out of the magazine market until recent years and is only number three today, the rugby league is a struggle and Sky TV Asia took a long time to become profitable. The redeeming factor is the turnaround of Foxtel to now being worth about $4 million but Murdoch only has a 25% interest. Also News investments in the Internet after an earlier false start in the dot.com crash are now becoming successful.

Even though analysts may not ascribe any value to both the Seven Media Group and PBL Media I do not believe that he would have any chance of getting Kerry Stokes out of Seven, it is more likely that Stokes could buy out the 50% holding of the private equity group KKR at a heavily discounted price to what he was paid.

PBL Media is now in the dire financial position that I forecast two years ago it would become under CVC. Murdoch could buy PBL Media giving him the Nine Network though the ACCC could have a problem with the resultant concentration in share of the magazines market of over 60%.

Murdoch may prefer to buy into CMH whose major assets are 25% of Foxtel, 50% of the highly profitable Premier Media sports channels and the 25% of PBL Media which is about to be watered down by Packer not contributing further equity. He could buy both by taking out the Packer 38% interest in CMH and making a fire sale offer for PBL Media which would give him a television network, Pay TV sports and news programming, 50% of Foxtel, a major share of the internet market and dominance of the magazine industry.

Murdoch might also consider Ten which is down after reaching a high of over $4 three years ago. Its demographic audience is in line with Fox in the US but does not offer the benefits in Pay TV or the Internet of CMH. Also the regional Pay TV operator Austar is now below $1 after its major US shareholder was believed to have rejected approaches from Foxtel at about $1.80 only a year ago. Austar would add to its 25% Foxtel but he would prefer to increase his holdings in Foxtel.

News Corp has low gearing and over $5 billion in cash to easily do these deals but as Murdoch said yesterday he wants to keep the cash in the bank, perhaps expecting more difficult operating results in the future.

Though cash is king it would normally be preferable to issue over valued paper for heavily discounted assets. The problem for Murdoch is that he believes that his shares are heavily underpriced, and even more so with recent falls in the stock markets.

The Australian media planets are never likely to align so well again for a cashed up Sun King.

Peter Fray

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