For most of his life, Kerry Packer had a reputation for being a bit of a Midas when it came to investing (occasionally, when it came to gambling). The stories of his ruthless coups and approach (such as buying and selling 9.9% of Westpac in the early 1990s) plunging into gaming and the media were legendary. And, of course, selling Nine to Alan Bond for a billion and buying it back with a $200 million note.

Of course, the stuff ups were always ignored, such as doing $400 million in India in the mid-1990s, punting heavily on currencies and losing on the Irish punt in the 1980s and buying a strategic stake in coal mines and selling, but not maximising a profit.

But Kerry Packer had a solid sense of the “edge”, of a strategic position on which he could build something, or at least emerge with a profit.

Not so James Packer. First there was OneTel, which raised doubts about his judgement; there’s the $1.7 billion wasted from selling PBL Media to CVC and handing over to peddlers of casinos and gambling interests in the US and the UK, and now it’s the mess at Consolidated Media where “little” Kerry Stokes is taunting him.

Mr Packer has allowed Mr Stokes to throw a grappling iron onto the deck at Consolidated Media by not thinking strategically and maximising his dominant position.

Packer and his Cons Media company (38% owned by Packer) refused to participate in the recapitalisation of PBL Media last year when it was apparent PBL would breach loan covenants if more funds were not made available.

So CVC organised the recap by itself, putting in more than $300 million and cutting debt to $3.8 billion. Cons Media’s stake in PBL Media fell from 25% to less than 1% because of that and commentators said that James Packer was finally finished with the media. And they all thought he was very clever.

To participate in the recapitalising of PBL Media would have cost Cons Media $75 million.

But all he did was to open up the Cons Media share register to a raid; when financial conditions had steadied by mid-year, Stokes obliged by building up a stake of 19.9% at a cost of $245 million (Stokes has access to $2 billion in cash and liquid investments).

Far from cutting his media interests, Packer went back into the market and bought nearly 3% of Cons Media at a cost of $60 million, then he sold the Park Street HQ for $50 million (at the bottom of the property market in Sydney’s CBD), then sold the 27% of Seek (that Cons Media owned) for $441 million, then announced a share buyback for 10% of Cons Media’s shares or just over 68 million shares.

At current prices Packer will have to spend about $220 million to lift his stake to about 45%. Stokes won’t accept and his stake will rise to about 25%, then later this year he can buy another 2.9%.

So for the sake of saving $75 million last year, Cons Media and Packer will be forced to spend at least $280 million-$300 million defending his position in Cons Media, as well as selling off two prime assets, one of which, Seek, he was always a very strong believer in.

And why did this happen? If Cons Media had maintained its stake in PBL Media at 25%, Stokes would not be able to own any more than 15% of Cons Media because that would have taken Seven’s share of the Australian TV audience above the maximum allowed of 75%. Seven already is up against that limit with its national metro network and Seven Queensland. It also has a stake of Prime TV, a regional affiliate.

In terms of the billions Packer made from CVC, the $75 million to maintain the stake in PBL Media was chicken feed, it would have been money well spent and the assets in Pay TV would have been better protected from any raid from Stokes, even if Telstra is told to sell its 50% of Foxtel.

This strategic blunder goes well with the waste of money at his main “love”, gaming company Crown Ltd. There the axe has been wielded with brute force on all those adventures offshore in the US, Canada etc.

Total write-downs of $1.7 billion puts him in good company with the likes of GPT (about $6 billion in asset write-downs in the 12 months to June 30), the Macquarie-listed investment funds, about ($6.1 billion), Westfield with ($6.2 billion), Mirvac with about $1.7 billion, Centro with about $6.2 billion (in its properties and retail trusts).

Crown’s difference to these groups is that Packer owns 38% of the group and is executive chairman and therefore bears more responsibility than most in that he drove the offshore expansion after quitting his media interests and splitting up PBL.

His Macau adventure has under-performed and he has two big shiny casinos in the Melco company with Lawrence Ho, which are outgunned by bigger operations and effectively hostage to the Chinese Government.

And, if anyone thinks the broadcast media is old hat in this country, why is the almost profitless Ten Network trading on a price earnings ratio of more than 23 times earning this morning, which is more than the earnings multiple that Packer sold his media interests to CVC and more than what KKR paid for half of the Seven Media Group. The Stokes raid on Cons Media has boosted its P/E to just over 25 times earnings.

The joke goes that Kerry Stokes had Alan Bond, and James Packer had his Alan Bond in CVC. But then a lot of people in the US gaming industry in particular had their Alan Bonds when James Packer and his Crown team came knocking.

Commentators this morning who were waxing about how it was all about money at Cons Media should stop and ask: why, when James Packer sells an asset and raises cash, does he always lose some of the money raised? He’s now sitting on $490 million from selling the HQ and the Seek stake, and is spending all that cash on a buyback that he never needed to make, simply to try make Kerry Stokes go away, or offer him more money.

That’s if he gets to start the buyback as Cons Media wouldn’t give any details: so is Kerry Stokes about to swoop, or Rupert Murdoch?

Peter Fray

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