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Australian Financial Review : October 17th 2006
FBA 016 ASX Codes GMI & GMIO A diversified portfolio of international resources stocks Net Tangible Assets Before tax* After tax* Diluted** NTA After tax As at 30 September 2006 $1.67 $1.49 $1.35 As at 31 August 2006 $2.00 $1.74 $1.40 As at 31 July 2006 $2.03 $1.76 $1.40 * NTA is unaudited. Estimated tax on realised gains. ** Assumes all options that expire on 30 Nov 2006 are exercised. For more information visit www.globalmining.com.au or phone 03 9235 1700 Managed by Bell Potter Funds Management Limited ABN 31 107 772 467 Ds, FX, Shares, Options and more October 20 & 21, Darling Harbour Leading Traders and Investors sharing systems & strategies 70 Seminars, 60 suppliers 2 DAYS ONLY Make money from the market Call 03 9813 8200 for a Program Learn how at the 20th Traders & Investors Expo See seminar schedule & participating companies at www.tradersexpo.com.au The Australian Financial Review Tuesday 17 October 2006 www.afr.com 16 PACKER MAKES MOVE PBL chief in a $4 billion media play From page 1 THE ONE FOR SALE Publishing & Broadcasting' TV (195.5 x 11.2) Magazines (264.2 x 11.8) Gaming (445.9 x 13.5) Corporate (--33.0 x 10) Target value of core business -- Debt + Cash + Investments Target market capitalisation Shares on issue (million) Source: Macquarie Research Macquarie EBITA valuation Less Macau value capitalised in NineMSN option value Grossed-up PBL valuation '' This cleans up the structure of the group, freeing up assets.'' '' Packer has championed PBL's investments in 'new' media.'' Chanticleer, back page casino and the Burswood casino in Perth. ''They have looked at structures before where they would dilute their holdings if they did some- thing post-media rules. But Kerry's bottom line was always that he didn't want to mess with Nine and didn't want to sell part of it,'' one source said. The funds could also bankroll the group's international expan- sion ambitions in gaming, which centre on its Asian gambling joint venture with Lawrence Ho's Hong Kong-listed Melco International. The venture yesterday announced that it was finalising a $US1 billion ($1.3 billion) bank financing pack- age to develop Macau's City of Dreams with several strategic part- ners, including a Leighton Holdings- led construction syndicate. Last week PBL and Melco revealed they would bid for a second casino licence in Singapore. The Packer family is also looking at moving into the Russian gambling market through its private company Consolidated Press Holdings (CPH). ''This cleans up the structure of the group, freeing up the media assets to do things and allowing the gaming company to be re-rated by the sharemarket because gam- ing companies trade on higher multiples than media companies,'' one source said. While the final management structure of the media business is unclear, the entry of new investors into the new vehicle could give Mr Packer more flexibility with regulators to argue that his private company has less influence than in the current PBL structure. At present, Mr Packer's private company CPH holds a 38 per cent stake in PBL. John Fairfax Holdings, publisher of The Australian Financial Review, is routinely mentioned as a takeover target for PBL. However, Fairfax is not part of the current deal. Mr Packer and Fairfax chairman Ron Walker met on at least two occasions in Sydney during the weekend, including an hour-long meeting at the Lamrock cafe in Bondi on Saturday. A Fairfax spokesman said Mr Packer and Mr Walker were old friends, adding that ''if there were tectonic discussions, it wouldn'tbe at the Lamrock cafe''. PBL shares jumped 42¢ to a record $19.85 yesterday. The AFR reported last week that PBL was considering a private equity deal. PBL said in a statement yesterday it did not comment on market speculation but was always ''constantly reviewing all its busi- nesses and options''. There is speculation that PBL's adviser, UBS, is talking to the private equity investor Castle Har- lan Mezzanine Partners (CHAMP) about joining the consortium. CHAMP has a history in the media sector. In December, it and parent Castle Harlan sold their combined 43 per cent stake in the regional pay television operator Austar to John Malone's Liberty group from the United States and Goldman Sachs JBWere for a profit of $460 million. Private equity funds look set to be key players in the shake-up of the $12 billion media sector that will follow the Howard government's decision to scrap foreign ownership restriction and ease the rules pre- venting companies from owning assets in more than one media sector. ''Private equity firms are looking at the media sector,'' UBS media analyst Nola Hodgson said last week. ''The prices they pay are often not ones that we can justify on fundamentals.'' The PBL media spin-off will include investments such as 25 per cent of Foxtel, 27.2 per cent of the online job ads company Seek, 50 per cent of Premier Media Group, 50 per cent of the internet business ninemsn and 50 per cent of the Hoyts cinema chain. Nine and ACP together made $476.6 million of earnings before interest, tax, depreciation and amortisation in the year ended June 30, 2006. The two businesses came together in 1994 when PBL shareholders approved the $2 billion merger of Kerry Packer's TV and magazine interests. This was after Kerry Packer previously sold the Nine Network to Alan Bond for more than $1 billion in 1987, only to buy it back three years later for less than a quarter of the price. More recently, James Packer has championed PBL's investments in ''new'' media companies such as Seek, ninemsn and Foxtel, which are expected to generate strong earnings over the next few years. PBL is rumoured to be on the shortlist to bid for Michael Han- nan's FPC Magazines, the pub- lisher of titles such as Delicious, Notebook, Super Food Ideas and Vogue. Sources close to FPC dismissed the rumour that a deal had been done with PBL. Final bidders will start sending their proposals to FPC's adviser, Citigroup, next week and a deal is not expected to be completed until late October or early November. ACP and Nine have been squeezed by the weak conditions in advertising markets over the past year and, in ACP's case, erratic consumer spending, which has affected magazine sales. It is understood Fairfax was in advanced talks earlier in the year to buy ACP's New Zealand assets from PBL for about $500 million, but the deal did not proceed. ACP's earnings before interest, tax, depreciation and amortisation rose a modest 6.8 per cent to $261.4 million during 2005-06. Nine's EBITDA slumped 20.3 per cent to $215.2 million during 2005-06 as it was whacked by a weak TV advertising market and the loss of viewers and ad dollars to Kerry Stokes's Seven Network. PBL is believed to be confident that the cost-cutting program at Nine, in which 240 staff have been removed since mid-2005, will boost the network's earnings. PBL executives talk about a two- to three-year program to reduce Nine's cost base in response to a ''step change'' in the TV ad market, which is losing ad revenue share to the internet and pay TV. Newdogswitholdtricks Neil Shoebridge '' The deal introduces a random element in the media shake-up.'' Less than a week after the Senate passed the Howard government's media package, James Packer is already rewriting the $12 billion media sector's new rules. The sale of 50 per cent of the media companies in Mr Packer's Publishing & Broadcasting Ltd to a consortium that includes American private equity giants Kohlberg Kravis Roberts and Newbridge Capital creates a big, new kid on the media block with the muscle to snap up more assets here and overseas. The PBL media spin-off will act as a great consolidator when the government eases the media ownership rules next year. Its arrival kills the endless speculation about whether or not Mr Packer wants to keep PBL in the media sector. Under the new rules, the spin- off will be able to quickly add either a newspaper or radio business to a collection of media assets that includes Nine Network, ACP Magazines and large stakes in ''new'' media companies such as the pay- television operator Foxtel, the pay-TV channel producer Premier Media Group, the Hoyts cinema chain and internet businesses such as Seek, ninemsn and carsales.com.au. The spin- off, which will include a range of private equity firms by the time the structure of the consortium is finalised, is also expected to look overseas. At the moment, PBL's offshore media ventures are restricted to relatively small publishing concerns in New Zealand, Britain and Asia. Mr Packer is expected to announce details of the spin-off late this week, including its senior executives. PBL chief executive John Alexander, whose background was in media before taking the top job, is widely expected to stay with the media assets and become a director of PBL's separate, listed gaming business. Other key PBL media executives such as Nine chief executive Eddie McGuire and ACP boss Ian Law are also expected to remain in place. The deal with Newbridge, KKR and others will introduce a random element in the looming shake-up of the media sector and fan speculation about PBL's interest in companies such as John Fairfax Holdings (the publisher of The Australian Financial Review) and radio company Austereo Group, both of which top analysts' lists of the companies most likely to be swallowed when the media rules change. PBL has shown no interest in radio since it sold a group of stations, including 2UE in Sydney and 3AK in Melbourne, to Alan Bond in 1987. But its new private equity partners might be drawn to the radio industry, particularly Austereo, which despite its earnings decline over the past five years (largely thanks to the success of DMG Radio's Nova network) remains one of the best performing radio companies in the world. While Mr Packer has publicly downplayed the idea of acquiring Fairfax, his new media partners could take a different view. Before news of the PBL media spin-off emerged, most analysts were speculating that PBL would join forces with Macquarie Bank to bid for Fairfax. But it seems investment bank UBS got under Macquarie's guard and had a better deal for Mr Packer, capitalising on its involvement with KKR on other deals.