Tycoon Packer closes in on rival's golden newspaper assets

Click to follow
The Independent Online
AS A compulsive gambler, Kerry Packer is not easily rebuffed. In casinos and on racecourses from London to Las Vegas and Sydney, Australia's richest tycoon has won and lost millions.

Now the man that Paul Barry, his unofficial biographer, describes as "vast, superhuman, angry and unstoppable", is raising the stakes once again over control of John Fairfax Holdings, Australia's richest and most influential newspaper group.

The Fairfax newspapers have eluded Mr Packer for years. They are known as the "rivers of gold" because of the fortunes their two flagships, the Sydney Morning Herald and The Age, of Melbourne, generate from classified advertising.

Mr Packer's designs on Fairfax have been frustrated up to now by laws that ban the same person owning newspapers and television channels in the same city. He owns Channel Nine, Australia's richest commercial television network.

But recent upheavals at Fairfax have sent shockwaves through Australia's newspaper business and left people asking if Kerry Packer is about to crash through the group's gates.

The drama began on 18 May when Brian Powers, an American-born businessman and Mr Packer's closest lieutenant, resigned as chief executive of both the Packer private company and the public company that owns Channel Nine. Mr Powers had in effect run the Packer empire for the past five years.

Within hours he was invited to join the Fairfax board, and did so. Eleven days later, on 29 May, Mr Powers was elevated to chairman of the board. He replaced a chairman appointed by Brierley Investments, a New Zealand company that has controlled Fairfax since it bought a 24 per cent stake in late 1996 from Conrad Black, the Canadian proprietor of the Daily Telegraph.

Brierley's move to relinquish the Fairfax chairmanship so swiftly has been widely interpreted as meaning that the New Zealand company has lost control of Fairfax. But to whom?

Mr Powers joined Fairfax as the representative of a trust controlled by Packer interests that holds almost 15 per cent of Fairfax shares. This is the maximum holding Mr Packer is allowed under the cross-media ownership law. Is Mr Powers a stalking horse for Kerry Packer? It may look that way.

But Mr Powers has the support of two other Fairfax directors and of institutional shareholders who are dismayed by Fairfax's recent performance. Over the past year, the company has invested heavily in its newspapers to keep ahead of Rupert Murdoch, who controls two-thirds of Australia's metropolitan newspaper market. Fairfax's costs soared by 11 per cent, 10 times the inflation rate. The returns did not always match.

In Melbourne, readers have not responded to a re-design of The Age, whose circulation has fallen below the critical figure of 200,000 on some days.

Sensing his rival's weakness, Mr Murdoch in late April launched a price war in Melbourne, cutting by half the cover price of The Australian, his national broadsheet daily. The move has soaked up some Fairfax readers.

Bob Muscat, Fairfax's chief executive, flew to Melbourne for crisis talks over The Age. Then, within days of Mr Powers' arrival at the company, Mr Muscat shook the Sydney newsroom by sacking John Alexander, editor- in-chief and publisher of The Sydney Morning Herald.

Mr Alexander, one of Fairfax's most powerful figures, had been credited with boosting the prestigious Sydney paper's circulation. But he also spent lavishly on staff, buying up journalists simply to keep them out of the clutches of Murdoch and other Fairfax papers, and he recently resisted moves to abolish some overseas postings. and merge some editorial operations with The Age.

Mr Alexander's demise is seen as a harbinger of heavy cost-cutting. Murdoch newspapers have suggested that up to 100 Fairfax journalists could be for the chop.

Kerry Packer would not mind a bit. For a man whose roots in newspapers go back to his grandfather, the legendary Sydney press proprietor RC Packer, he has a low opinion of journalists. Over the years Mr Packer has become convinced that journalists, particularly Fairfax journalists, have been out to "get" him, as part of the Australian syndrome of "cutting down tall poppies". The mood at Fairfax is nervous.

As to what the latest upheavals really mean for the future ownership of Fairfax, Mr Powers readily admits it would be "disingenuous" to ignore his five years at the helm of the Packer fleet of television stations and magazines.

The Australian Broadcasting Authority, a regulatory watchdog, has launched an inquiry into whether Mr Powers' ascent has breached the cross-media rule.

And what of Rupert Murdoch's camp? Lachlan Murdoch, his son and heir, who runs the Australian arm of the Murdoch empire, said on Tuesday that he would not be interested in buying any Fairfax papers that came on the market. "When you reach the size that we have become, acquisitions become difficult," he said. Presumably this was a reference to government regulations, rather than any shrinking ambitions.

Comments