The non-Kerry Stokes shareholders in the Seven Network (around 51% of the company’s listed shares) are owed an explanation of investment losses approaching half a billion dollars as the group continues to fritter away the $2.5 billion or so it received from selling half of its TV and magazines business to KKR.
The Seven camp will strongly resist the idea and argue that the time for that sort of accounting will be at the annual meeting later this year, but August’s profit announcement might be a better time to detail all the investments, purchase prices, current prices, losses and gains.
Some sort of assessment is needed, because Kerry Stokes’ investment record is less than flattering.
We had a reminder of this yesterday with GRD of Perth accepting a cheap takeover offer from a British company.
Stokes and Seven Network had around of 12% of GRD (which has been written down sharply): the offer is 55 cents a share, compared to the Seven purchase price of around $2.35 in 2007. Seven may have written the holding down by $41.6 million, but that confirms the lapse in judgment in buying into GRD in the first place.
Now some in the markets are wondering if Stokes’ latest foray, the raid on Consolidated Media, is the forerunner of the possible repeat of the plunge into West Australian Newspapers, which has cost Seven around $312 million.
There have been lots of headlines from the plunge into Consolidated Media Holdings, jousting with James Packer and forcing him to lift his holding in Cons Media to more than 40% as Stokes built his stake to almost 20%.
In fact the Packer camp seems almost affronted by the Stokes advance, while over at News Ltd there was a sense of disbelief that anyone would dare to try and crash the cosy Foxtel/Pay TV party currently run for the benefit of the Packer and Murdoch camps.
Stokes has invested close to $300 million in Cons Media. He had invested over half a billion in West Australian Newspapers at one stage, but unfortunately for him and Seven shareholders, the drop in the market since late last year saw that figure cut. That $540 million purchase price for the 24% compares to yesterday’s market value of WAN of $1 billion, so the value of the Stokes holding is $241 million or thereabouts.
That’s a paper loss of $300 million, and about what the company wrote down the stake by at the end of 2008 (it was $312 million). It is also about what he has invested in either Telstra or Cons Media. We have no way of knowing whether the Telstra holding is in profit or losing money, as the others are (Engin and Unwired were other loss-makers). Including the GRD write-down and the losses on Engin and Unwired, seven has done just under $500 million in its investment plays, and that’s without knowing how much the Telstra play is loss making, or is in the money.
Mr Stokes and Seven bought into GRD because it was a Perth-based company and Mr Stokes has a thing about home town companies. GRD with Stokes’ support, knocked back an indicative offer of up to $2.75 a share from Transfield Services in late 2007, much to the sorrow of small shareholders who then had to watch as the share price fell, culminating in yesterday’s 55 cents a share agreed bid from UK group, AMEC.
Seven will get just over $12 million for its stake when it could have picked up around $60 million from Transfield.
And then there’s the fiction, laid out in the 2009 interim report that Seven Media Group has no value, having being written to nil value in Seven Network’s books (but we can’t find out if fellow owner, KKR, followed suit in the fund that holds the Seven Media stake). If the Seven TV Network and Pacific Magazines have no value, then Kerry Stokes is the Easter Bunny and I’m the Tooth Fairy.
So far, all Kerry Stokes has done is confirm that if you see him buying into a company where you own shares, then sell, because the shares are all-but certain to lose value: Kerry Stokes’ way of investing a small fortune is to start with a big one.
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