Quotes of the Day
They share a birth date — sept. 8. both are married to women who excelled as models. And as the sons of Australia's two greatest media moguls, both know what it's like to have money — and to blow large sums of it. And yet ... "I couldn't imagine two more different people," says a Sydney lawyer who's worked closely with Lachlan Murdoch and James Packer over the years. "James has the softness of his mother, but he's extraordinarily numerate and has a bonhomie that he got from his old man. Lachlan is measured, reflective, highly intelligent. There's a hint of clean-cut, Princeton guilelessness about him, but there's also something behind those eyes that's constantly assessing." Different they may be, but Murdoch, 36, and Packer, 40, are friends and once again a team. They've joined forces to launch a $3.06 billion takeover bid for Consolidated Media Holdings (CMH), which owns a catalog of blue-chip Australian media assets, from free-to-air and cable television to digital and magazine interests.
It's no stretch to see the venture as two men trying to step out from the shadows of their fathers. On Boxing Day 2005, the brilliant, belligerent Kerry Packer died, giving James control of Publishing and Broadcasting Ltd., the multibillion-dollar family empire. Five months earlier, Lachlan had abruptly quit as News Corp.'s third highest-ranking executive in New York City, convinced he was being overruled by underlings. According to a source, he complained to his father, News Corp. chairman Rupert Murdoch: "What's the point of me being here?" The young Murdoch and his wife, Sarah, returned to Sydney, and while a 2-year noncompete clause has kept him out of the headlines, the call of big business was a siren song.
Murdoch saw an opportunity in the jigsaw of James' businesses. Late last year, Packer's people split the family conglomerate into media and gaming divisions, with James more focused on the latter. Just before Christmas, Murdoch approached his mate about doing a deal on the group's media fragment, CMH. Over a wet January weekend, bunkered down in a city office, the pair nutted out their privatization plan, which would raise Packer's stake in CMH from 38% to 50% and give the other half to Murdoch, who would take charge as executive chairman. "I am only interested in running businesses I can add value to," Murdoch told reporters. "This is going to be my focus over the years to come if we're successful."
That success isn't a given. The Australian Competition and Consumer Commission will decide by early April whether to block the deal on the grounds that it would substantially reduce competition in the Australian media market. Among the issues is whether the young Murdoch is acting alone through his private investment company, Illyria, or in part for News Corp., of which he remains a nonexecutive director. Having done the sums on Murdoch's estimated $1 billion equity contribution to the bid, business author Neil Chenoweth says, "For Lachlan to be doing what he's doing, family money has to be involved." Then again, Chenoweth concedes that it's unclear how much Murdoch's main backer, SPO Partners, a private investment firm based in San Francisco, is putting up. Lachlan is adamant: "This is completely my own transaction," he told reporters in January. Asked about the CMH bid last month, Rupert Murdoch said, "Not only are we [News Corp.] not involved, I'm pretty ignorant about it."
From a regulatory perspective, in the bid's favor is that CMH doesn't fully own anything. Rather, it's a holding company for a cluster of minority stakes, including 25% of pay-TV operator Foxtel, 50% of Fox Sports and 25% of PBL Media, the private-equity vehicle that owns Australia's free-to-air Nine Network. This mixed bag of holdings leads Chenoweth to suspect that Murdoch and Packer are planning "a second transaction that they haven't yet disclosed" — a deal that would turn piecemeal investments into controlling stakes.
Monash University media specialist Nick Economou says Murdoch and Packer appear to be members of a new breed of non-interventionist proprietors. "Both of them have struck me by their total lack of interest in wielding influence," he says. "They're not motivated by that stuff. They want money." Foxtel is the jewel in the CMH satchel. After losing $104 million in 2005, it turned a $62 million profit last year — and analysts forecast rapid growth as it increases its 29% penetration of Australian homes.
The scions' friendship has thrived despite some searching tests. They were opposing generals in Australia's rugby-league war of the mid-'90s. While Murdoch was recruiting players to join News Ltd.'s rebel competition known as the Super League, Packer was trying to keep them loyal to the 90-year-old Australian Rugby League. (The parties eventually compromised.) In 2001, while Packer and Murdoch were executives in their fathers' companies, they jointly invested in One.Tel, a deal that cost both companies a total of about $500 million when the cut-price mobile-phone company collapsed. Packer encouraged Murdoch's involvement in One.Tel, and helping him now to take a slice of what was Packer property may be, some theorize, a way of repaying him. In that sense, at least, this latest project looks like a sure thing.
- Daniel Williams/Sydney