As the dust settles on the continuing James Packer media liquidation play, here are the current rankings of Australian media players based on market capitalisation:
News Corp: $36.6 billion
Fairfax Media: $3.5 billion
Consolidated Media Holdings: $2.26 billion
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Seek: $1.74 billion
Ten Network: $1.4 billion
WA News: $1.38 billion
Seven Network: $1.24 billion
APN News & Media: $1.12 billion
REA Group: $952 million
Whilst the above list values the equity component, the key consideration is debt and controlling shareholder debt.
APN and Ten are both effectively in play as the O’Reilly and Asper families teeter under excessive debt, whilst Fairfax is still over-geared although the market is getting more comfortable as CEO Brian McCarthy continues to deliver strong cost control.
One of the most interesting aspects of yesterday’s $440 million Seek sale was that James Packer reportedly first offered it to Fairfax Media and News Corp, which represented Australia’s third most valuable media company offering a key stake to its two bigger rivals.
Each could have bought 19.9% of Seek for about $400 million, but to take the full 26% stake would have required a full takeover bid and about $2 billion.
These sort of numbers show just how much classified advertising value has moved online and how Fairfax completely missed the boat under successive CEOs Fred Hilmer and David Kirk.
While private equity firm CVC paid a stupid price for PBL Media in 2005, we’re about to see the float of carsales.com.au which will confirm an enterprise value of close to $1 billion. CVC’s 47% stake in carsales.com.au is the one asset which has substantially appreciated since the Packer exit, once again confirming the huge value in online classifieds.
James Packer has walked away with a profit of more than $300 million from his Seek play, whilst News Corp is now close to $500 million in front on its 60.7% stake in REA Group, owner of realestate.com.au. Dropping $700 million on MySpace isn’t so bad when a single Aussie internet play has delivered such a windfall.
However, even News Corp declined to stump up the cash when REA director Sam White and his family sold their 10.6% stake to institutions at $5.75 a pop in late June. REA shares hit a record high of $7.48 this morning, so Rupert made a bad call.
Despite the Murdoch family being debt free and News Corp itself having a strong balance sheet, Rupert is declining to pick up distressed assets. Seek would have been a great fit for News Corp’s dominant Australian newspaper business, just as Channel Ten fit well with Foxtel and the global pay-TV assets.
However, we may yet see Rupert sharpen his pencil if Kerry Stokes does indeed launch a bid for the Packer media rump.
Murdoch despises Stokes after the $200 million C7 war and would hate having him as a partner in Foxtel and Fox Sports.
If James Packer really doesn’t care to be a media owner these days, then he’ll use stalking Stokes to lever a big price for his pay-TV assets out of Rupert. That said, Rupert wasn’t prepared to play ball with Seek, although online classified businesses have none of the political clout and prestige that something like Foxtel delivers.