The deal,in two waves of 50 and 25 per cent respectively — the first wave was completed last year — and inked for a massive A$5 billion (US$4.1 billion), will see CVC, headed by Adrian MacKenzie — often described by the media as ‘the Peter Pan of private equity’ — take control of PBL’s television flagship property the Nine Network, along with Australian Consolidated Press, which publishes many of the country’s leading magazines and some online properties.
Media agencies believe the shift, which follows April’s changes in the Government’s laws on foreign ownership, shows an inherent weakness in PBL’s soon-to-be-former media assets, opening the door for more cost effective buying and a reduction in advertising rates premiums. CVC is likely to embark on a round of cost-cutting to increase efficiencies across programming and content, particularly at FTA Nine Network, which has ceded its mantle to Seven, which some fear could ultimately affect the brand’s ability to sell space. “The only question from Nine’s perspective is what CVC will do to the product. Under Kerry, it was to be number one at all costs. (CVC) will invest, but probably not at the same levels,” says Jeff Cressal, MD, Universal McCann Australia.
Additionally, Packer is set to split PBL into two companies: Consolidated Media Holdings (CMH) and gaming company Crown. CMH will hold PBL’s entire stake in cable-TV property Foxtel, along with several leading online platforms, while Crown will focus on the gaming industry globally. Analysts say the moves were prompted by Packer’s desire to focus on businesses which allow for a higher margin or price-per-earning (PPE) ratio, while at the same time providing the financial capital needed to further fund his moves into the casino industry.
“James Packer has clearly shown since the death of his father that he wants to take the company in a different direction,” says Peter Cox, media analyst, Cox Media Australia. “He has shown that he wants to move into gaming and also increase his interest in online, which he sees as high-growth areas, because he sees traditional media as low growth areas.”
But Cox notes that Packer has several challenges ahead — most notably, venturing into the saturated Las Vegas market, and expanding operations to include Macau and Russia. “If successful, Packer could be one of the international giants, but if not, he could lose his family’s empire in five to 10 years. It’s a massive gamble for him.”
But commentators believe there’s a twist ahead. While Packer will remain on the board, it’s speculated that CVC intends to sell back to the market in about five years to retail and institutional investors, leaving CVC with a handsome profit, and the Packers again, the majority shareholders — much like his father did with Alan Bond.
