After spending about a gross $600 million assembling, then disassembling an Australian radio network, the UK-controlled DMG group has thrown in the towel and sold 50% of its business to Lachlan Murdoch’s Illyria group.

Murdoch will become chairman of a new joint venture company overseeing the operation, according to the statement from DMG Radio Australia’s parent company Daily Mail and General Trust.

It was a statement long on platitudes and short on financial detail, such as how much was paid and the terms. Nor is there any mention of an option for the remaining 50%. These partial sell-downs normally contain an option deal to protect the position of the new partner.

According to a story on the website of a family newsletter, Murdoch paid $110 million, which values DMG Australia at about $220 million, or about half the net investment in its licences.

That makes the Daily Mail group a desperate seller.

Counting his harbourside house and other investments, Murdoch has spent the best part of $170 million this year on various deals. That’s a long way from the $3.3 billion value deal he pitched to buy James Packer’s Consolidated Media group, now being stalked by Kerry Stokes.

Murdoch said he hoped to explore new growth opportunities within the business and also in related media.

“Patience is a virtue, and after exhaustively searching the market for the right acquisition, we have found in DMG Radio Australia the right business, the right partner and the right brands, which are positioned for exemplary growth,” Murdoch said.

“The skills we have in-house at Illyria will complement the strengths of DMG Radio Australia.”

DMG Radio Australia owns the Nova FM radio stations in Sydney, Melbourne, Brisbane, Adelaide and Perth and the Vega FM stations in Sydney and Melbourne. Over time it had owned regional stations bought from Rural Press, for $88 million, then sold to Macquarie’s Regional radio for almost $194 million in a deal that attracted regulatory interest.

That cut the total investment in Australian radio to about $400 million, a sum that has been made to look even larger by the recessionary impact of the slowdown in ad revenues in the Australian media sector.

It paid a massive $155 million for the Nova licence in Sydney, $52 million for the Vega licence in Melbourne and $106 million for the Vega licence in Sydney. Not much return on those huge payments.

The UK parent said in a trading update for the 11 months to the end of August that DMG Radio Australia suffered a 2% fall in revenues in a radio market where ad revenues fell 4%. The parent releases its full-year figures in London tonight, our time.

Through Illyria, Murdoch has made investments in regional television group Prime Media, toy group Funtastic and a team in the Indian Premier League cricket tournament.

He owns 11.5% of Prime Media, where Stokes also sits to protect his main NSW regional affiliate.

Could Stokes and Murdoch, the younger, combine to have another crack at Cons Media or Premier Media Group down the track?

Murdoch sits on the board of global media company News Corporation, where his father Rupert is chairman and chief executive.

Lachlan Murdoch and his wife paid more than $23 million for a Sydney harbourside mansion recently, upgrading from trendy Bronte on the Pacific Ocean, to the more sedate climate of Bellevue Hill.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey