Published 2 Feb 2012 in The National Times
There’s been some excitement on the bourse and in media boardrooms this week over Gina Rinehart’s move on Fairfax Media. It seems the West Australian iron ore magnate is angling for a seat on the Fairfax board to add to her $165 million berth at the Ten Network.
Rinehart is keen to take her original 4 per cent stake of Fairfax to about 15 per cent. She bought the first shares for $100 million and is likely to spend close to $200 million on this raid.
But what are the real implications in this venture?
There’s been speculation that the Communications Minister, Senator Stephen Conroy, might move to block Rinehart’s attempted takeover of Fairfax – if indeed that’s what it is. The grounds for such a move would perhaps be that she’s not a fit and proper person to own media assets because of her alleged political bias. Rinehart is a vocal opponent of the Labor government and its resource rent tax scheme. The timing of Rinehart’s grab has created talk about the blocking move by Canberra. She’s made the play as the final report of the Convergence Review on media and communications is due to be handed down, and in the knowledge that the current convoluted and unworkable media ownership rules will be changing.
Blocking any takeover is open to the regulators under provisions of the Trade Practices Act dealing with matters of public interest. A strong case would have to be made that Rinehart’s control would lessen media competition. There is no “media” law that prevents her actions now and even less under the proposed new regulator.
But, for me, the timing is coincidental. Rinehart is buying Fairfax shares under the existing rules, which limit audience share across platforms and across markets. She is therefore entitled to increase her stake in Fairfax – while holding significant shares in Ten – as long as she does not control the companies and her combined media assets do not constitute a breach of the “three-and-two” rule (where companies are allowed to own up to two media outlets — TV, radio and newspaper — in a single area).
There’s also the issue of the government’s legislative and political timetables to consider. Filling in the substantial missing detail in the Convergence Review’s recommendations is going to take months, if not years. The timeline could stretch well beyond the next election cycle. We will be playing by the old rules for a while yet.
Rinehart’s decision to move now can be explained without recourse to conspiracy theories or invoking the “evil witch of the West” stereotype. She is cashed up; the Fairfax share price is ridiculously low (down from about $5 five years ago to less than 90 cents today) and by taking a chunk of stock she gains leverage over the company at a time when it needs to transition from being primarily about ink on paper to being truly converged and multimedia.
Rinehart may well be thinking long-term and looking for business synergies, cost-savings and profit-taking by joining up her investments in Ten and Fairfax. She would effectively then be able to either harmonise these business units to create a going concern, or sell-off strategic assets once the new ownership rules and content regulations are in place.
Whatever her motives, Gina Rinehart still has to play by the rules. She cannot easily move to positions of control of both Ten and Fairfax Media under the current cross-media ownership regulations without a fight. Under the mooted new rules she would also have to pass the public interest test.
Having said that, I don’t think it is useful to demonise Rinehart and suggest that she has an ulterior personal and political motivation for taking on Fairfax. She has strong and very conservative political views and she has been spending some of her inherited mining wealth on anti-government campaigns in recent months, but I am not sure that Gina Rinehart is another Kerry Packer or Rupert Murdoch waiting in the wings.
Rinehart is incredibly rich and she has seen an opportunity to buy a media asset while it is at or close to the bottom of its share price cycle.
What we should be concerned about is that this share market play makes a mockery of the idea that the news media and the press are somehow bastions of free speech and freedom of expression.
According to her own family, Rinehart is a tough woman and as hard as the ore her father dug out of the Pilbara to create her vast fortune.
She will have to be resolute if she is to take on Fairfax journalists who have fiercely defended their independence in the face of perceived corporate interference. Readers of Fairfax publications may also not take too kindly to Rinehart’s editorial line.
Her solution might be, as some have suggested, to wrestle control of the major Fairfax dailies and leave the rump to be sorted by the board. This scenario rests on Rinehart’s motivation being influence rather than profit.
Rinehart’s multimillion-dollar raid on the Fairfax share cupboard just goes to show that the adage “freedom of the press belongs to those who can afford to buy one”, still applies in convergent Australia.
Rinehart’s estimated wealth is staggering – she’s rumoured to be one of the richest people on the planet – so she can easily afford to buy Fairfax and whatever she damn well wants, but there are many hurdles to jump before she can claim the throne as Australia’s princess of print.