It’s a good thing that investors realise – or should realise – that when you buy into a company involving Kerry Stokes, you are essentially buying in to Stokes himself.
He runs things his way, and never seems to worry too much about other investors.
Today’s deal is a classic example of Stokes’ deal making. Take one company part owned by Stokes’ main investment vehicle Seven Group Holdings – in this case, the television, magazines and internet business Seven Media Group Holdings – and ram it together with another company part owned by Seven Group Holdings, West Australian Newspapers.
The deal, which will see WAN buy Seven Media Group for just over $4 billion, and assume $1.6 billion in debt, is basically designed to allow Stokes to reorganise his empire.
Seven Group Holdings becomes the owner of the Westrac heavy equipment business, and a slew of other investments, including a stake in James Packer’s Consolidated Media Group, a stake in Prime Media and a stake in broadband company Wireless Broadband Australia.
The combined WAN-Seven Media Group vehicle, to be renamed Seven West Media, will house most of Stokes’ major media assets.
WAN shareholders should theoretically do well out the deal – they get to diversify away from the West Australian market – but there is a bit of a sense that this is mainly about what Stokes wants, and the shareholders can either come along for the ride or not.
That’s not dissimilar to what we saw last year when Stokes rammed his private Westrac business into Seven Group, in a deal that raised questions about the use of related party transactions.
We will get an idea of how WAN investors fell on April 11, when more than 50% of them will need to approve the deal for it to go through.
Stokes has hinted this morning that Seven West Media will be positioned to hunt for further acquisitions – probably in a better position than Seven Group Holdings was, given Seven West Media is a pure media sector play.
The question is: What will Stokes hunt for?
It does appear pay television assets are high on his shopping list. Could he also look at more regional assets? Or perhaps radio, an area where Seven West Media does not have a presence? Or maybe digital properties, which are much sought after right now.
No doubt Stokes has a few more deals up his sleeve. And no doubt they won’t be without some controversy.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
