Joe, John, Denis and Neill Wagner
No one will be more interested in last week’s defamation verdict against Alan Jones, 2GB and 4BC than Nine Entertainment — the company that is about to buy control of Jones’ ultimate employer, Fairfax Media, which controls just over 54% of Macquarie Media.
While the judgement in favour of the four Wagner brothers of Toowoomba and the enormous damages of more than $3.75 million (plus costs which are yet to be awarded) won’t derail the planned takeover of Fairfax, it has underlined the reputation and financial damage Nine faces in buying a company containing someone like Alan Jones.
Nine is up to its neck in this story with the network already being sued by the Wagners for defamation along with journalist Nick Cater (who emerged from the Jones case with claims against him dismissed). The Nine case involves similar allegations to those levelled by Jones, but which were aired on the 60 Minutes program in 2015 with Cater in the story (and the sixth respondent in the legal action).
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WIN TV (Nine’s regional affiliate at the time, now with Ten), is also in the Wagners’ sights. The station’s owner Bruce Gordon has built a 25% stake (directly and through financial derivative) in Nine and will be the largest shareholder in the merged Nine-Fairfax company.
Gordon revealed the acquisition of an interest in more Nine shares in a filing with the ASX last Friday about his company’s holdings of what are called cash settled swaps (with Deutsche Bank). They are a financial derivative and a way of taking interest in shares above regulated limits without having to pay for them until some time in the future. This holding will be settled once Nine has issued shares to Fairfax shareholders under its takeover offer, increasing the number of shares on issue.
Gordon wants to maintain his holding in the combined company at around 14.9%. His ownership of WIN prevents him from moving to a direct 19.9% stake in Nine or the combined Nine-Fairfax company, hence his use of these swaps.
Now, Nine is preparing its bidder’s statement and Fairfax is preparing its target statement for its shareholders in the planned $2.4 billion takeover. What both documents say about Macquarie Media, Jones and the judgement will be of considerable interest; as will what Nine says about its defamation action from the Wagners. What’s the betting Nine tries to settle this case as quickly as possible, and on a confidential basis?
Fairfax will surely try and say as little as possible about this case and Jones’ part in it. Macquarie will likely lodge an appeal just to shut down any talk during the takeover period leading up to the meeting of Fairfax shareholders in November. Fairfax will have to include an independent experts report on the value of Fairfax Media and its investments in Domain (60%) and Macquarie Media (54.5%).
Keep an eye out to see whether Jones’ long string of defamation actions and losses are singled out in either document. As it is, Jones could be seen as a considerable contingent liability for the merged company, both actually (for the two defamation suits from the Wagners) and prospectively (for future claims).
Lawyers and corporate advisers for Fairfax Media and Nine Entertainment will not have to wait for any appeal by Macquarie Media to assess the financial impact. Macquarie made $3 million of provisions in its 2017-18 accounts on legal advice for outstanding defamation actions. Macquarie Media, like Fairfax, is a self-insurer when it comes to defamation cases. That means the $3.75 million (plus costs when allocated by the court) will be met from those Macquarie provisions, plus a top-up, with Fairfax Media having to account for around 54% of the extra costs in its books as an extraordinary or abnormal item.