The embattled board of Seven West Media is meeting tomorrow with both 83-year-old billionaire controlling shareholder Kerry Stokes and the company’s independent directors, who are reportedly furious over the scandalous revelations about the Spotlight program’s dealings with rapist Bruce Lehrmann.
As Sky News business editor Ross Greenwood wrote in The Australian last week, “You can almost bet the Seven television network is right now for sale. It’s all just a matter of price.”
Kerry’s son Ryan Stokes is certainly not hiding the fact the Stokes family is falling out of love with Seven, telling Greenwood: “Ahh, at this point it’s not for sale,” before adding: “I think that we will see additional consolidation within media.”
Why bother?
The directors of parent company Seven Group Holdings, from which Kerry retired as chair in 2021, may also be tiring of the drama and poor returns. Perhaps if Stokes wants to retain the power of owning media assets, he could make a personal bid to privatise Seven West Media. It wouldn’t be that expensive, particularly for a man whose wealth is now valued at $11 billion.
When Crikey gave Stokes and Seven a touch-up after the embarrassing Ben Roberts-Smith defamation judgment in June 2023, the stock was still at 40c, giving Seven West Media a market capitalisation of around $600 million.
Since then it has cratered further and closed at a miserable 19.5c yesterday, giving the whole company a value of just $287 million. As Bernard Keane and Glenn Dyer pointed out in February, Seven West Media is also carrying $257 million in net debt. And that’s after not paying a dividend since October 18, 2017.
Compare that with Seven Group Holdings, which was valued at $14.4 billion when its shares closed at $38.69 yesterday. Remarkably, the boring parent company is now worth more than 50 times its more famous media offshoot.
With newspapers and free-to-air television dying, you have to ask why the Stokes family still bother. Kerry’s close friend James Packer hasn’t been invested in old media since Ten Network Holdings went broke in 2017, and even the Murdochs offloaded the majority of their media empire to Disney in 2019.
In its 2022-23 annual report, Seven Group opined that its “investment in Seven West Media is held for strategic purposes”. But the only thing “strategic” about Seven is the political power and protection it gives Stokes, as he builds a bigger non-media empire.
He’s been deploying that power more overtly recently, whether by backing in Roberts-Smith and Lehrmann, or trying to get Basil Zempilas parachuted into the WA state Parliament to take over the leadership of the Liberal Party. Basil is already lord mayor of Perth, following a noisy and conflicted campaign from the Stokes-controlled outlets, particularly the monopoly West Australian newspaper.
Industry moves
That paper also increasingly functions as a blatant advocate for the mining and fossil fuel lobby, an industry both major political parties in Western Australia support with ridiculously low iron ore royalties.
Queensland’s Labor government raised a staggering $15.3 billion in coal royalty revenues in 2022-23 after introducing the world’s highest coal royalty rates of 40% when the price rises above $300 a tonne. By way of contrast, WA’s iron ore royalties remain fixed at a flat rate of just 7.5%.
Given that WA is still burdened by a state debt in the tens of billions, would that have happened if Stokes didn’t control Seven West Media?
The 2024 edition of The Australian’s Rich List values Gina Rinehart at $50.48 billion, which is more than WA’s outstanding state debt. And when you include her four kids — Bianca, Ginia, Hope and John Hancock — at $3.92 billion each, that’s a total of $66.16 billion for one family.
They are almost double Andrew and Nicola Forrest at $37.17 billion, and triple Clive Palmer whose estimated $21.9 billion fortune also comes primarily from WA iron ore assets.
Stokes is not directly invested in the iron ore industry, but he certainly services it through the Caterpillar franchise owned by his WesTrac outfit in WA, along with Coates Hire and more latterly concrete giant Boral. The Boral play is his biggest ever, and last Friday Stokes appeared to secure absolute control after the Boral board recommended Seven Group’s sweetened takeover bid.
Seven Group launched a Boral mop-up bid on February 19, comprising $1.50 per share in cash and a total value of $6.25 a share, based on the elevated value of Seven Group shares at the time.
The independent Boral directors recommended against the bid, with the backing of an independent report. Despite Seven Group initially saying it was its best and final offer, Boral shareholders are now guaranteed a minimum $1.70 per share in cash, and there will be a 26c fully franked dividend to be paid on April 26.
Seven Group started with 71.6% in February and was up to 79.2% of Boral by April 15. However, Boral shares closed at $6.03 yesterday.
There’s still 20% to be snaffled from 51,000 small Boral shareholders, which won’t be easy given retail shareholders are often reluctant sellers — Seven Group needs 90% to move to compulsory acquisition of the balance.
If Stokes pulls it off, it will be a rare example of him making a successful full takeover bid of a public company. His normal modus operandi is to seek control by creeping up on companies without moving to 100%.
Sensitive and soiled
Given all that has happened at Seven West Media, it’s well past time for the Australian Communications and Media Authority regulator, and even the federal government itself, to pose the question of whether it is appropriate to still have one controversial billionaire in charge of sensitive and increasingly soiled media assets as he builds a bigger industrial conglomerate.
This has happened before. In 1996, the Australian Broadcasting Authority produced this comprehensive 102-page report examining the initial move Stokes made on Seven in the context of whether then 15% shareholder in the Seven Network, News Corp, was inappropriately influencing Seven as the pay TV industry was getting going.
As this Murdoch family timeline demonstrates, News Corp ended up selling its 15% stake in Seven Network in December 1997 for $220 million, pocketing a $127 million profit.
That was the moment when Kerry Stokes achieved unfettered control over the Seven television business. Twenty-seven years later, it’s fair to say he hasn’t made a very good fist of it, particularly in recent years.
