So much for the fantasists in the News Corp newspapers this morning about how Lachlan Murdoch and Bruce Gordon were somehow acting benignly in joining up with a “rescue” plan for the Ten Network.
The reality, as the AFR’s Chanticleer column reveals this morning, is far more brutal. The dynamic duo of Murdoch and Gordon threatened to sue the pants off the Ten directors and seem to have literally scared Ten into the hands of administrators KordaMentha.
As cynical moves go, it is nasty, brutish and highly conflicted. Do federal politicians really want to pass laws to help people who try such tactics? The situation calls for ASIC and ACMA, the two main media/corporate regulators, to become directly involved in the Ten collapse and ascertain how it happened and whether Murdoch and Gordon are pushing the boundaries of the takeovers code or the media ownership laws. The legal advisers say they are not.
The AFR‘s Tony Boyd explains what happened:
“Lachlan Murdoch and fellow billionaire Bruce Gordon had threatened to sue all the directors of Ten if they went ahead with a recovery plan. That threat was contained in a letter sent to the Ten directors on Monday night at 9pm. The same letter was sent to the directors of Ten’s subsidiary companies, which included Ten chief executive Paul Anderson and chief financial officer Dave Boorman.”
The explosive letter was sent by Murdoch and Gordon’s hired guns, Fort Street Advisers. Besides revealing they would not guarantee the proposed $250 million loan, there was this kicker, quoted in the AFR, suggesting Ten is far more heavily in debt that the $66 million figure disclosed with the February 28 results:
“The letter, a copy of which has been obtained by Chanticleer, said the billionaires understood the company would need $45 million ‘in the coming few days’. It said that the company would need to draw down $147 million by the end of this week and $173 million by the end of July.”
That money would come from the $200 million revolving credit facility provided by the Commonwealth Bank (due for repayment on December 23) and personally guaranteed by Murdoch, Gordon and James Packer, who were to be paid almost $30 million in fees for the service.
According to Chanticleer, the Fort Street letter said that unless Ten had in place alternative finance, Murdoch and Gordon would consider that Ten’s directors could not avoid administration. The key threat was as follows:
“Fort Street Advisers has been requested by our clients to put you each on notice that, to the extent they are damaged by you failing to prevent drawdowns under the existing facility in breach of the statutory requirements mentioned above, they will reserve their rights to pursue the statutory compensation rights they may have against you personally.”
That is an amazing, bare-faced threat, given the many roles Lachlan Murdoch played (interim CEO, executive chair, chairman) in Ten’s demise, plus the huge losses incurred by all shareholders.
Has there ever been an individual wearing so many hats in the one corporate control situation?
Lachlan Murdoch is simultaneously a shareholder, financier, supplier, competitor and now bidder for Ten, even though the latter role is illegal under Australia’s current media laws.
And there’s even four different corporate entities carrying all these conflicts. 21st Century Fox, where Lachlan is co-executive chairman, is the overpaid Ten program supplier that was reportedly dragging its heels on a new deal over the weekend. Murdoch’s private company, Illyria, owns a 7.7% stake, but the Murdoch-managed Foxtel is also on the Ten register with a 13.8% stake. What must Foxtel’s 50% joint venture partner Telstra think about potentially writing off its $77 million investment in Ten so that Bruce Gordon and Lachlan Murdoch can take personal control?
Then there is the separately listed News Corp, where Murdoch is also co-chairman, which is mooted as a potential bidder for Ten, but that would involve the related-party transaction of buying Foxtel and Illyria out of Ten’s shares and Illyria out of its loan guarantee arrangement.
The legal threat from Gordon and Murdoch clearly drove the outcome as it left the board with “with no choice but to appoint administrators,” Chanticleer said.
The Fort Street letter is in addition to the letters from two high-powered legal firms released yesterday afternoon detailing the moves by Murdoch and Gordon to combine their interests — and claiming that the move did not breach the takeover rules.
The legal advisers to the duo are UK-based Allen Overy for Lachlan Murdoch (News Corp’s main UK legal firm) and Atanaskovic Hartnell, a Sydney-based firm with Tony Hartnell, a former ASIC chairman, along with arguably Australia’s most battle-hardened corporate media lawyer, John Atanaskovic, who was acting for Gordon but knows the Murdochs intimately.
According to letters from both firms last night, Murdoch (7.5%) and Gordon (14.9%) have combined their stakes in a jointly controlled 22.5% holding in Ten. Together they are the largest shareholder, and the legal advisers claim this is not a breach of the takeover laws (two shareholders with more than the 19.9% maximum acting in concert) or a breach of the media ownership rules (the 15% limit).
But the cynical nature of the arrangement is exposed when reading the contents of last night’s letters and the disclosures by Chanticleer this morning. Much of the News Corp commentary and supposition this morning about the intent of Murdoch and Gordon is fantasy when set against the Chanticleer disclosures about the legal threats.
Last night’s letters, for example, reveal the decision to form a partnership was taken on June 9, the same day the duo told the Ten board that they would no longer guarantee the CBA loan or any other facility.
Gordon and Lachlan simultaneously pulled the plug and joined forces to take over Ten, all the while hoping our politicians will do a legislative favour to help an 86-year-old who lives in Bermuda and the world’s most controversial and powerful media family, which have given us the 2003 Iraq invasion, Donald Trump and Brexit, not to mention phone hacking, climate denialism, Andrew Bolt, Fox News and page 3 girls.
Surely all this is a bridge too far, even for the famously successful Murdoch rent-seekers.
It’s over to the regulators along with Malcolm Turnbull, Mitch Fifield and the crossbench to thrash this one out, but you would imagine the sharp practices on display would significantly reduce the prospects of success for the all-powerful Murdoch family.
Whoever leaked the legal threat is clearly not prepared to be stood over. And both Lachlan and Bruce Gordon are not exactly smelling of roses this morning with 17,000 small shareholders puzzled about why their shares in Ten Network Holdings are no longer trading on the ASX.