MacKenzie's old boss still calls the shots

News analysis: Rupert Murdoch still has a hold on key employees, even when they no longer work for him

RUPERT MURDOCH'S role in the departure of Kelvin MacKenzie from Mirror Group was revealed yesterday when News International, the media mogul's UK holding company, confirmed that it would be supporting the former Sun editor's bid for Talk Radio.

Leslie Hinton, executive chairman, yesterday said that NI would be a 20 per cent shareholder in the consortium which Mr MacKenzie is putting together to make an offer for the troubled national radio station.

Mr MacKenzie's move is the culmination of a campaign by NI to lure him away from the Mirror titles, where he had recently been stemming the decline in circulation since moving over from running cable channel L!VE TV five months ago.

This was in stark comparison to the Sun, where sales had been falling sharply. Last week its editor, Stuart Higgins, was ousted and replaced by David Yelland. Meanwhile, however, rattled NI executives were also devising a plan to lure Mr MacKenzie away from Mirror Group.

Mr MacKenzie is understood to have been offered a role as editor-in-chief of the Sun and the News of The World, but this was swiftly rejected.

Mr MacKenzie is believed to have been tired of working for other people, and was keen to take on a role where he could be in charge.

As a result, NI offered to back a bid for Talk. But observers say the company would have supported almost any venture that Mr MacKenzie suggested as long as it took him away from the Mirror.

"Murdoch just wanted him out of Mirror Group," one insider said yesterday.

The move illustrates the hold that Mr Murdoch often continues to have on key employees, even when they no longer work for him. It also demonstrates the lengths to which he will go to stem any competitive threat to the Sun's position as the best-selling daily newspaper.

Mr MacKenzie had long been interested in the station, apparently boasting that he could do a much better job than the incumbent management. When Luxembourg Group CLT-Ufa put its 64 per cent stake in Talk Radio up for sale two months ago Mr MacKenzie was one of the many interested parties who received details of the station's financial performance from Lehman Brothers, the US bank which is handling the sale.

Media cross-ownership rules prevent NI from owning more than 20 per cent of a national radio station. However, the company's backing gave Mr MacKenzie the credibility to attract other backers.

He is being advised by Apax Partners, the group which financed Chris Evans' pounds 85m buy-out of Virgin Radio. He also convinced Media Ventures International, a fund which holds 24 per cent of Talk, to hang on to its investment.

Whatever his reasons for leaving Mirror Group, however, the timing of Mr MacKenzie's departure raised eyebrows in the City. The German newspaper publisher Axel Springer is currently preparing a bid for Mirror Group and will be keen to exploit any weakness. On Monday evening, advisers were eagerly anticipating a fall in Mirror's share price when the markets reopened. In the event, however, the shares slipped just 0.5p to 232.5p.

Accounts of Mr MacKenzie's departure differ. Some suggest that David Montgomery, Mirror Group's chief executive, found out about his plans and forced him to make a choice between the two projects. Others say the departure was more amicable, with Mr Montgomery accepting that Mr MacKenzie wanted to leave.

Mr Montgomery said yesterday: "I am really sorry to see him go, but he has a burning ambition for this project and we cannot stand in his way."

Nevertheless, City observers question the ethics of a company director pursuing private projects with support from the group's main competitor. They also wonder why Mr MacKenzie broke cover when it is far from certain that his bid for Talk will succeed.

Other competitors are still keen to take control of the station. The American group Jacor Communications and London News Radio, whose shareholders include the Daily Mail, have both submitted bids.

And yesterday Talk's management team threw its hat into the ring. Paul Robinson, the station's managing director, said he and four other senior executives were assembling a consortium to make a management buy-out bid.

"We have the inside track, we have the value and that is what CLT is interested in maximising," he said, adding that the group was likely to submit an offer in the next few days. However, he refused to name any of the group's backers.

Mr Robinson criticised Mr MacKenzie's track record. "He has no experience of radio broadcasting. And it has to be said that L!VE TV has not been a great success," he said.

Mr Robinson denied that he or the other executives would leave Talk if Mr MacKenzie's bid was successful. "I would certainly talk to him if he approached me," he added.

Even if Mr MacKenzie succeeds in his bid, however, analysts question whether the station will ever be a success. It has struggled since its launch when it opted for a downmarket "shock jock" approach which did little to attract an audience. A subsequent relaunch has lifted listening figures and improved finances to the point where the station is set to make a small operating profit in June.

Nevertheless, Talk remains hamstrung by its pounds 3.5m annual licence fee which keeps it permanently in the red. Although this will probably be reduced when the station renews its licence in two years' time a successful bidder would still have to support two years of heavy losses.

Most of all, observers wonder why the limelight-loving Mr MacKenzie, who was being seriously spoken of as Mirror Group's next chief executive and was being lined up for a similar role in the case of a successful Axel Springer bid, should choose a marginal radio station as his next career move.

Still, if radio does not work out he can probably ask Mr Murdoch to find him something else to do.

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