Oct. 18 (Bloomberg) -- Australian billionaires James Packer and Kerry Stokes today made the first moves in what is set to be the biggest shakeup of the nation's media in 20 years.
Packer, Australia's richest person, agreed to sell half Publishing & Broadcasting Ltd.'s television and publishing assets to a venture jointly owned with CVC Asia Pacific, raising A$4.5 billion ($3.4 billion), the company said today. Stokes, who controls the nation's second-largest TV broadcaster, bought an 8.4 percent stake in West Australian Newspapers Ltd., publisher of Perth's only daily, and is seeking more shares.
The two men are taking advantage of changes to ownership laws approved today that allow foreigners to take control of Australian media companies and proprietors to own two forms of media in one city. Shares of John Fairfax Holdings Ltd., publisher of the Sydney Morning Herald, and radio network Austereo Group Ltd. jumped on speculation they may be the next targets.
``There will be a big shakeup in the industry,'' said Atul Lele, who helps manage the equivalent of $290 million at White Funds Management in Sydney. ``It's the first opportunity in years for media players to realign portfolios and buy assets.''
The changes, approved by the upper house Senate last week and ratified by the House of Representatives today, undo ownership restrictions that have limited the ability of media investors to expand in Australia.
Hometown Paper
Media deals have accounted for less than 1 percent of the $460 billion of takeovers in Australia since 2000, according to data compiled by Bloomberg. Austereo and West Australian Newspapers have led a surge in media stocks this year on speculation the new laws will unleash a wave of deals.
The 11-member S&P/ASX Media Index has risen 17 percent this year, beating the benchmark index's 11 percent gain. The law change may take effect as soon as Feb. 1, according to Morgan Stanley.
The speed at which Packer and Stokes, who controls Seven Network Ltd., have moved shows the importance of getting in early, said Peter Cox, a media analyst who has advised Australian companies and the government for 30 years.
Under the old laws, which limited companies to owning one form of media in a single market, Stokes, who owns a television station in his hometown of Perth, was prohibited from controlling the newspaper.
``Stokes doesn't want to see it go before he can take it over, that's why he needs to make a move now,'' said Cox.
`High Price'
Fairfax has pursued West Australian Newspapers in the past. The companies ended merger talks in July 2004 after failing to agree on terms.
Shares of West Australian Newspapers to A$10.51 today, and earlier reached a record A$11.04. Seven, which is seeking to lift its stake to 14.9 percent, paid A$11 a share, valuing the publisher at A$2.3 billion.
``The high price paid for West Australian Newspapers has implications across the print media sector, particularly Fairfax,'' said Alex Pollak, an analyst at Macquarie Bank Ltd.
Shares of Sydney-based Fairfax climbed 4.8 percent to A$4.76, valuing the company at A$4.8 billion. The board held an unscheduled meeting yesterday to ``discuss the current and future developments in the industry,'' spokesman Bruce Wolpe said.
Fairfax, which lacks a cornerstone investor, has been named by analysts as one of the most likely takeover targets.
Buyout Firms
Shares of another potential target, radio network Austereo, rose 6.3 percent to A$2.19, valuing the company at A$789 million. Village Roadshow Ltd. has reduced cut its stake to 50.2 percent from 67.3 percent over the past month, sparking speculation it may be a willing seller.
Publishing & Broadcasting shares rose 2.3 percent to A$20.30, and earlier reached a record A$21.79.
``One would not be surprised to see some activity as a result,'' of the new media ownership rules, Finance Minister Nick Minchin said in an interview in Canberra yesterday.
Packer's deal underpins expectations that buyout firms, which have been scouring Australia for takeover opportunities this year, will play a major role in the media shakeup.
``Private equity have been looking at all kinds of assets in Australia pretty thoroughly,'' said Luke Sinclair, who helps manage the equivalent of about $1.9 billion in stocks at Invesco Asset Management Australia in Melbourne.
Offers for Australian companies by buyout firms have surged to $21.3 billion this year, from just $1.4 billion last year, according to Bloomberg data.
Media, Gaming Acquisitions
Packer will sell his media assets, including the Nine television network, magazines and stakes in Internet sites ninemsn and carsales.com.au, to a new company, PBL Media, jointly owned by CVC Asia-Pacific and Publishing & Broadcasting.
The 39-year-old, who took control of the company after the death of his father Kerry last year, will keep management control of the media empire, which will be held in an unlisted company.
PBL Media company will take seek further acquisitions once the media ownership changes take effect.
``This transaction enables PBL Media to take advantage of opportunities in the media sector in Australia and overseas,'' Publishing & Broadcasting Chief Executive Officer John Alexander said in the statement.
``To make the deal work for private equity, they need to have growth and the only way to get growth is by acquisitions,'' Cox, the independent analyst, said. Fairfax will ``definitely'' be on the venture's radar, and West Australian Newspapers is also a potential target, he said.
Packer said he will use the proceeds from the media sale to fund the expansion of Publishing & Broadcasting's gaming operations in Asia, where it is developing three casinos in Macau and bidding for a license in Singapore.
The sale of the company's media assets ``releases cash at a time when there is a land-grab underway for gaming and entertainment assets around the world,'' Packer said.
The company will focus on investments in Macau, Europe and Singapore, he said. Publishing & Broadcasting in September bought Packer's private stake in a U.K. casino venture with Damian Aspinall for A$92 million.
To contact the reporter on this story: Miriam Steffens in Sydney at msteffens1@bloomberg.net
