“Before we start, minister, I should disclose that Kerry Stokes, the billionaire who controls the Seven Network, is the second-largest shareholder in Estia Health, one of Australia’s largest for-profit nursing home operators which is currently battling two major COVID-19 outbreaks at its Ardeer and Heidelberg West facilities.”
Unfortunately, Sunrise co-host Natalie Barr failed to make this disclosure before tearing strips off federal Aged Care Minister Richard Colbeck, during a live interview on Stokes’ Seven Network yesterday morning.
It just goes to show that the more Kerry Stokes diversifies his investments into a range of non-media industries — mining, property development, equipment hire, oil and gas, aged care and even honey manufacturing — the more conflicts will emerge.
And based on the way Stokes is blatantly backing broadcaster Basil Zempilas — his employee — for a Perth mayoral run, he really doesn’t appear to have any idea on where to draw the line with conflicts of interest. (As both Crikey and Media Watch have explained in recent days, the only person with even less of an understanding appears to be Zempalis himself.)
Stokes, a man valued on The AFR’s Rich List at $5.7 billion, might have refused to invest another dollar into his media empire for the last five years now, but he’s certainly been spraying his wealth around in other sectors.
Stokes’ majority-controlled Seven Group Holdings conglomerate has spent more than $600 million snapping up a 16.3% stake in Boral during the COVID-19 pandemic, money that his separately-listed and debt-laden Seven West Media would love to have received if the billionaire were still partial to supporting his languishing media investments.
Even Estia Health has received more pandemic support than Seven West Media. Seven Group Holdings disclosed on July 1 that it had opportunistically increased its stake from 8.54% to 10% during share price weakness brought on by the pandemic.
Rather than going in deeper, you would think Stokes might have been once bitten, twice shy on Estia Health, as he has now spent almost $100 million to become the second biggest shareholder after fund manager Perpetua.
Estia Health owns and runs 69 nursing homes, offering 6180 places, and in 2018-19 received a whopping $438 million in funding from the federal government, which more than covered the company’s $386 million employee expense bill. The residents chipped in a further $146 million and have handed over more than $800 million in residential bond money held by the company.
Estia Health’s disclosures to the ASX have been tardy in recent times, even though Stokes is represented on the board by Warwick Smith, a one-time aged care minister in the Howard government, who should know plenty about levelling with the public and regulators in a timely manner.
Estia Health’s shares tumbled 8% on Monday after the company released this statement to the ASX outlining federal regulatory interventions against its Ardeer and Heidelberg West facilities. Stokes and his minions often gloat about their political connections so it will be interesting to see how hard the feds end up going against Estia Health.
Monday’s announcement failed to tell investors that there are more than 110 infections across the two facilities, or how many staff have contracted COVID-19. The brand damage is considerable, which probably explains why in February Estia claimed to have net assets of $813 million when its market capitalisation is now only $388 million.
Stand by for big write-downs with the full year results on August 18.
Seven Group Holdings first invested $64 million for a 7.53% stake in Estia Health in 2016-17, at an average price of $3.24 a share. Smith was appointed to the board to represent Stokes in May 2017.
This was after Stokes made his apparent decision to not put another dollar into Seven West Media following a recapitalisation proposal back in April 2015.
It makes no sense to order an ongoing fire sale of assets by Seven West Media’s new CEO James Warburton at the same time as he’s personally spending big on businesses like Boral and Estia Health. Why isn’t Stokes buying more Seven West Media shares in its hour of need?
Seven West Media shares closed at just 9 cents last night, valuing the business at a miserable $142 million, less than half Estia Health’s $388 million market capitalisation.
Expect write-downs to be disclosed on the value of both Seven West and Estia when Seven Group releases its full year results on August 26, in what will be one of the strangest reporting seasons we’ve ever experienced.