Stokes vs Packer: A media mogul death match

The first played out on our TV screens in the late 1990s as Big Kerry’s title-holding Nine Network battled for supremacy with Little Kerry’s up-and-coming Seven Network.

After a late flurry, the judges awarded the round to Seven.

With Big Kerry’s death in 2005, and his son James’ decision a year later to start breaking up the family’s “old media” empire, the brawl switched to the courtroom as Stokes sued the entire media world, including the Packers and Punch owner News Limited, for their alleged role in a grand conspiracy to kill his C7 pay-TV channel. Seven was annihilated in this round (although an appeal remains before the judges).

Now, the rumble rolls into the boardroom, with Stokes this week launching his audacious, $175m-plus raid on the Packer-controlled ConsMedia. By last night, he had secured about 18% of the company and was believed to be on his way to 19.9%, not enough to outvote James Packer with nearly 38% but enough to ask for a couple of board seats and cause a serious nuisance of himself.

Nobody outside Stokes’ inner circle really knows what he’s up to (if you’re reading, Kerry, give us a call). As of last night, there was still no formal confirmation that Seven was the buyer of the mystery block of shares.

Official word should come today in a “substantial shareholder” notice to the stock exchange but everything points towards Stokes as the predator.

He has the opportunity in the form of $1bn or more of cash sitting on the Seven balance sheet. And he has the motive in his desire to get involved in pay-TV (ConsMedia no longer controls Nine but it does own, among other things, an appetising 25% stake in Foxtel).

There’s the added benefit of messing with Packer’s head, although you’d hope there’s a bigger strategy at work given he’s playing with Seven shareholders’ money, not his own.

The raid is straight out of the Stokes playbook.

He has shown an extraordinary ability in the past to use a seemingly small beachhead investment to take over companies and their boards.

In 1995 Stokes bought 19.9% of Seven – the maximum allowed without launching a takeover bid – and immediately launched a boardroom putsch.  Within six months, he succeeded, ousting two chairmen to take the seat himself.

Since then, by legally “creeping” up the share register by buying up to 3% of Seven ever six months and not participating in share buybacks, he has managed to increase his stake to an indomitable 48.4%.

In 2006, on the eve of new, looser media ownership laws, Seven went after West Australian Newspapers, which publishes the tabloid of the same name in Stokes’ hometown of Perth.

Starting with a 10% stake, snared in a ConsMedia-like raid, he now owns 23% and has become chairman having taken control of the board.

Realistically, though, it’s going to be far more difficult for Stokes to exert his will on the ConsMedia board given Packer’s controlling stake and his reluctance to sell out, particularly to Stokes.

The board is also stacked with seriously heavy business identities – including Packer himself, Packer lieutenant John Alexander (the chairman), the hard man of the wharves Chris Corrigan and recently departed Qantas chief executive Geoff Dixon. And, unlike his tactics at Seven and WAN, Stokes will struggle to mount a convincing case to other shareholders that the company and its board are floundering and desperately in need of a magical Stokes overhaul.

It’s hard, then, to figure out what Stokes hopes to achieve.

Will he wait, patiently, for the day Packer decides he doesn’t want to be involved in media at all and sells out? There’s speculation that Stokes’ main motivation is his desire for a piece of Foxtel, or at least a say in what happens to it, particularly if the government forces Telstra to dump its 50% stake (News owns the other 25%).

But whether a minority stake in a minority shareholder gives you much clout is debatable. ConsMedia’s 50% stake in Premier Media Group, producer of the Fox Sports channels, and 26% of the Seek internet jobs business could also be attractive but their other shareholders could have something to say about a meddlesome Stokes.

Could it be that Stokes simply sees a bargain, that be believes in the pay TV model and reckons ConsMedia’s been undervalued by the market?

Could it be that he just wants to hedge his bets? He’s now got a say in just about every media sector – free TV (Seven), pay TV (the ConsMedia stake), newspapers (WAN), magazines (Seven owns Pacific Magazines), regional TV (14.9% of Prime TV) and the internet (Yahoo!7 and now ConsMedia’s Seek). Is this merely prudent diversification? Or the sign of a man who doesn’t know what he wants but can’t resist the opportunity to make mischief?