By Damon Kitney.
It took one of Kerry Packer’s former lieutenants to finally deliver Fairfax Media into the hands of his old boss’s beloved Nine Network.
For decades, Packer competed with, coveted and at times even wanted to destroy Fairfax.
For many years, the newspaper publisher’s current chairman, Nick Falloon, was by the big fella’s side in the Packer family’s Park Street bunker until he was fired in 2001.
Yesterday, Falloon was able to engineer the deal Packer long craved, but for vastly different reasons to those long contemplated by his former boss.
It was the rise of the tech titans, Google and Facebook, with their global scale and command of the digital advertising market, that brought Fairfax and Nine together to shore up their respective futures in a new media landscape.
James Packer admitted yesterday that his father, regarded as the savviest TV operator of his generation, would have been stunned at the pace of change in media since his death on Boxing Day 2005.
“The speed at which that has occurred over the past decade would have been a surprise to my father,” Packer told the media yesterday.
James and Kerry Packer.
The coming of the digital revolution was one of the reasons James Packer sold Nine a year after his father’s death, reaping more than $5.5 billion to build his gambling empire.
Yesterday, after Nine’s shares fell on news of the deal, the company closed with a market capitalisation of just $1.97 billion while Fairfax was worth $1.92bn.
“I grew up with my father talking about Fairfax and the rivers of gold — they clearly went away,” Packer said. “Google is now the biggest Australian media company, Facebook is probably the second biggest and (online real estate group) REA is No 3. And the traditional media companies don’t occupy the place they once did.”
On a historic day when it was revealed the 177-year-old Fairfax brand would no longer exist, Packer said he had “no regrets” about never owning it but said he hoped the media company would keep publishing newspapers.
Yesterday’s deal, codenamed “Galactic” — was only three weeks in the making after Nine chairman Peter Costello phoned Falloon at the end of the first week of this month with a plan for the companies to merge.
He followed up the call with a formal written proposal, which initiated a round-the-clock due diligence process led by Nine’s adviser, investment banker Michael Stock, who last year opened the Australian office of US boutique advisory Jefferies after his departure from Credit Suisse.
Stock is close to Costello and with Nine’s legal advisers from Ashurst, he worked with Fairfax’s advisers, Macquarie Capital, and its lawyers, King and Wood Mallesons, to finalise the terms of the deal.
There has been a frenzy of merger talks between Australia’s leading media companies after the Turnbull government’s changes to ownership regulation last year, including between Kerry Stokes’s Seven Media Group and Fairfax.
Fairfax Chairman Nick Falloon.
Last year, before private equity giant TPG and the Ontario Teachers Pension Plan made a formal takeover offer for Fairfax in early May, the media company held discussions with Nine about merging.
Nine showed no interest in a deal. Fairfax then succeeded in engineering an auction for the company between TPG and another private equity firm, Hellman & Friedman, which were both keen on acquiring its online real estate classifieds business Domain.
In early July both private equity bidders withdrew from the process, leaving Fairfax to pursue a sharemarket listing of Domain, in which it retains a 60 per cent stake.
But the data rooms assembled for both private equity bidders and the voluminous documentation produced for the Domain spin-off meant Nine and Fairfax were able to hit the ground running earlier this month once they decided to get serious about a deal. Importantly, Stock advised TPG on its Fairfax tilt when he was previously at Credit Suisse.
Fairfax Media chief executive Greg Hywood and Nine boss Hugh Marks had also developed a relationship through the Stan online streaming venture between the two companies.
Falloon and Costello also know each other from when Falloon was chief executive of the Packer family’s Publishing and Broadcasting during the 1990s when Costello was federal treasurer.
Packer yesterday put behind him decades of animosity between Fairfax’s metropolitan mastheads and his family: “I think it is important that there is more than one publisher of news in Australia so I hope that Fairfax’s newspapers continue into the future. I really mean that. I don’t think it matters if the Fairfax name is there or not there, it is what they produce that counts.”
Fairfax Media CEO Greg Hywood and Nine CEO Hugh Marks.
Packer said Nine’s key interest in buying Fairfax was not for its newspapers but for its stake in online real estate classifieds business Domain.
“From the outside this deal appears to make sense in that Nine can probably cross-promote Domain, cross-promote Stan and create synergies between Nine’s traditional broadcasting business and Fairfax’s traditional publishing business. It will be interesting to see if this deal spurs consolidation amongst other players in the Australian media market.”
Packer has previously criticised Fairfax for the way it covered him and his family, especially in The Age and The Sydney Morning Herald. But the Packer family’s legendary loathing of Fairfax extends back to James’s grandfather, newspaper titan Sir Frank, who as owner of The Daily Telegraph waged war on a daily basis with the-then broadsheet SMH.
Over the years, the Packer family was involved in detailed negotiations to take control of Fairfax, including through proposals with Macquarie Bank.
In 1991, the Packers were part of the Tourang consortium led by Canadian media baron Conrad Black that made a bid for the publishing group.
At the time, Kerry Packer said: “For 50 years of my life, Fairfax has been competition to me and my family. The idea that I can end up buying 15 per cent … amuses me.”
But he was forced out of the consortium in controversial circumstances following a public outcry over his ability to control the newspaper publisher, leaving Black’s Hollinger Group to be Fairfax’s largest shareholder when it relisted on the Australian Stock Exchange in 1993 following its earlier collapse.
Malcolm Turnbull, a former adviser to Mr Packer, once famously revealed how the late media magnate threatened to kill him when he warned Packer he would have him ejected from the Tourang consortium. Later that decade, the Packers owned a 14.9 per cent stake in John Fairfax. The stake was sold for more than $400 million in 2001.
Damon Kitney is the author of “The Price of Fortune: The Untold Story of James Packer” which will be published by Harper Collins later this year.