The mining magnate Gina Rinehart was last night trying to snare a cornerstone stake in Fairfax Media, the newspaper, digital and radio group, as she seeks to increase her influence over the media landscape.
Insider: Rinehart's power play
Ownership of Fairfax 'doesn't matter': Hockey
A stockbroker acting for Mrs Rinehart - Australia's richest person - last night approached fund managers in a $192 million attempt to acquire a 10 per cent stake in Australia's biggest independent media company, which owns this website. If successful, the purchase would give her a 14 per cent stake in Fairfax and possibly a seat on the board. She already has a 10 per cent stake in the Ten Network, of which she is a director alongside Lachlan Murdoch.
BusinessDay understands that brokers acting on Mrs Rinehart's behalf had secured a 5 per cent shareholding which, added to her existing stake, would give her almost a 10th of Fairfax's equity. Negotiations were continuing with other shareholders about increasing that amount.
Last month Mrs Rinehart's estimated wealth swelled by $10 billion to almost $20 billion after the South Korean steel company Posco increased its stake in an iron ore deposit held by her flagship company, Hancock Prospecting.
Fairfax, which is capitalised at $1.74 billion at yesterday's closing share price of 74 cents, remains vulnerable to acquisition, given that its share register does not have a significant holding by an individual investor.
CMC Markets chief market strategist Michael McCarthy said Fairfax shares are likely to jump when trading resumes.
"When we see someone with the firepower to become a very substantial shareholder it's likely we'll see some traders jump in to try to ride the coattails of any updraft," Mr McCarthy said.
Critical time
The development comes at a critical time for the media industry which is battling a weak advertising market and is adjusting to a structural shift towards the internet.
It also comes as the federal government is scrutinising ownership in the media as part of two inquiries into the sector.
Notoriously secretive, Mrs Rinehart has rarely discussed her interests in the media. However, sources close to her recently indicated she was seeking a bigger influence in national affairs.
During 2010, Mrs Rinehart was prominent in opposing the federal government's proposed mining tax.
Then she surprised media watchers by taking a 2 per cent holding in Fairfax and paying $165 million for the Ten Network stake.
Soon after the Ten Network acquisition, Hancock Prospecting stated it was interested in investing more in the media business, ''given its importance to the nation's future''.
In January last year Mrs Rinehart quietly increased her holding in Fairfax to 4 per cent.
The company owns The Australian Financial Review and a national radio network based on 2UE-3AW, and extensive rural publishing interests.
The chairman of Fairfax, Roger Corbett, was unavailable last night and Mrs Rinehart's office did not return calls.
Influence
The approach for the 235 million shares was made to fund managers by the broker Morgan Stanley after the sharemarket closed yesterday. The broker did not disclose the buyer but was offering 81.7¢ a share, or a 10 per cent premium to the closing price yesterday.
Last night one former Fairfax board member expressed doubts that Mrs Rinehart could wield excessive influence over the 180-year-old company.
Other fund managers cited the inability of the former director John B. Fairfax to exert influence in the boardroom, ultimately leading the Fairfax family to sell its 14.6 per cent stake.
Fairfax's biggest shareholder, Commonwealth Bank, has 12.37 per cent, although that is held on behalf of fund managers. Maple Brown Abbott and Orbis Investment Management hold 8.9 and 7.3 per cent respectively.
Short-selle rs caught short?
One group of investors unlikely to be cheering the Rinehart raid on Fairfax will be short-sellers - those who borrowed the stock in anticipation that its price will fall.
Fairfax has been among the most popular shares to be shorted in part because of the gloomy advertising industry prospects as retailers and other industries cut back on ads.
The Rinehart purchase may prompt a scramble by short-sellers as they try to purchase stock before it begins a rally, said CMC's McCarthy.
“(The purchase by Rinehart) does seems a bit of opportunistic move given the performance of Fairfax shares over the past couple of years,” he said. Fairfax shares are roughly half the level of a year ago. "If she gets 10 per cent, that will make her the largest single shareholder,'' Mr McCarthy said. "There is a long tradition of Australian magnates taking media stakes and it will be hard to avoid the perception this will be used as a soapbox. "It does seem to cut across the Fairfax culture which to external parties appears to be fiercely independent," he said.
With BusinessDay's Chris Zappone
Email a friend