Murdoch looms over Aussie media landscape

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SYDNEY -- When Lachlan Murdoch held an exclusive cocktail party in Sydney in November 2006 to launch his private investment company, Illyria Ltd., many were expecting a major announcement regarding the Murdoch heir's business future down under.

However, Murdoch's real renaissance on the Australian media scene didn't happen until this week, when he unveiled a new AUS$3.3billion ($2.87 billion) joint venture with fellow media scion James Packer in which they will buy out blue chip Australian media group Consolidated Media Holdings and take it private.

Indeed, Murdoch had kept a low profile since he relocated here after resigning from his family controlled global media conglomerate in August 2005, citing a desire to "be his own man."

Since then, Murdoch, through Illyria, has acquired small stakes in Internet movie rental firm/digital media group Destra Corp., and reportedly had discussions about an investment in Indian film production outfit, Percept Picture Co.

But this new deal, initiated by Murdoch -- and which he'll run as executive chariman -- now brings him front and center on the Australian media landscape.

Under the deal, Packer and Murdoch will form a joint venture company to buy 100% of Consolidated Media Holdings which owns Australian media assets including 25% of pay TV provider Foxtel; 25% of PBL Media, which owns the Nine TV Network; leading publishing company ACP Magazines and a variety of digital media businesses; 50% of Fox Sports; and about 27% of online jobs site Seek Ltd.

PBL Media is majority owned by private equity group CVC Asia Pacific, while Packer already owns a 38% stake in CMH.

"The newly formed consortium will present a daunting rival to its media peers, given its direct focus on pay TV, and extended links across free-to-air television, magazines, online and newspaper publishing," Goldman Sachs JBWere analyst Christian Guerra said in a client note.

But with Murdoch still a non-executive director of News Corp., the deal also has raised the interest of anti-trust regulator the Australian Competition and Consumer Commission, while Murdoch was forced to deny reports this week that he has received financial backing from News Corp. for the bid.



ACCC chair Graeme Samuel said this week that "Lachlan is a non-executive director of News Corp. (and) clearly through family interests he has a substantial financial interest in News Corp., but whether that ... amounts to anything that could give rise to competition concerns is one of the factors that we'll need to examine."

"This has nothing to do with the Murdoch family, quote unquote, or News Corp. So the conspiracy theorists who would say somehow this is connected to News or the 'Murdoch family' -- it's just wrong," Murdoch told reporters this week.

Indeed, Murdoch's 50% stake is being financed by San Francisco-based equity firm SPO Partners.

That said, industry watchers and analsyts have already flagged a number of scenarios from the deal. Murdoch would be a signifcant part of CMH's 25% stake in pay TV giant Foxtel. He would sit alongside News Corp., which also holds 25% of the pay TV company, with the two able to block any moves by 50% shareholder Telstra Corp. In addition, analysts say that Murdoch and Packer could be in a position to buy out 75% of PBL Media from CVC Asia Pacific when it decides to exit, effectively giving Murdoch a controlling interest in Australia's Nine Network.

For his part, Murdoch says the 17% premium on CMH earnings he and Packer are paying is an indicator that he plans to add value to the company.

"It's a huge premium to pay but we'll pay it because we like the businesses and I think I can add a lot of value," Murdoch said. "I was part of founding Foxtel in 1993 and 1994. I ran Fox TV stations in the U.S. and I know the print business pretty well so across the board it's a pretty good fit."

But media agency head Harold Mitchell contends that Murdoch and Packer will use the business as a launching pad for future local expansion.

"This puts him right in at the front line. He has to go to work every day and a big media owner like that has to be actively involved which is why I think they will use this as a base to expand out from there," Mitchell said. "They must, because just to sit as a passive investment, which essentially is what it's been, I don't think that's the nature of these two people. So we might see another empire rising out of it all."
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