The jewel in Murdoch's crown
Four years after turning his back on his apparent destiny, Lachlan Murdoch has emerged as a media proprietor in his own right.
It may not be News Corporation, but the acquisition of a 50 per cent interest in DMG Radio Australia from the UK’s struggling Daily Mail and General Trust and, importantly, management control, means Lachlan now owns a stake in a significant media business over which he can exercise control.
Until today’s deal he had been primarily a passive portfolio investor in a motley collection of media interests including stakes in Prime Media, Funtastic, Quickflix, an Indian talent agency and even an Indian Premier League cricket franchise.
The biggest deal he had attempted since relinquishing his executive role and status as heir apparent at News Corp was the proposed $3.3 billion privatisation of Consolidated Media with James Packer.
That deal showed Lachlan had an eye for assets – Consolidated Media’s interests in Foxtel and Premier Sports are strategic and subsequently attracted Kerry Stokes onto the ConsMedia register – the timing was poor, with the deal coming even as the financial crisis deepened at the start of last year.
Lachlan’s private equity backers couldn’t arrange the funding, which turned out to be a good thing for Lachlan.
Since then he has apparently pored over hundreds of potential investments and acquisitions until finally landing one that appears to make a significant amount of sense.
Daily Mail and General Trust (DMGT) has, like most traditional media businesses, been struggling with the global economic recession and the severity of the conditions in the UK. It had previously written down the value of DMG Radio in Australia, although the Australian business, which owns nine radio licences including the Nova and Vega FM stations, has been able to offset soft revenues with cost-cutting to maintain profitability.
It was a seller of the half share in DMG Radio, not because the funds released will make a material difference to its financial position, but presumably because it wanted to bring local experience and more entrepreneurial instincts to bear on the business.
Lachlan is understood to have paid about $110 million for his half share, funded by about $50 million of equity and $60 million of borrowings. At face value that looks like an exceptionally good deal that reflects the post-crisis rebalancing of the relationships between vendors and prospective buyers.
It isn’t clear how much DMGT paid to assemble its portfolio of Australian licences – the estimates range from about $400 million to more than $700 million, but Lachlan is clearly buying in at a fraction of what it cost DMGT to build the business.
Radio has shown itself to be remarkable resilient in this market, while Austereo has shown there are considerable growth opportunities as the sector moves more firmly into the digital environment. Austereo has exploited the online and interactive aspects of digital radio more aggressively than its competitors, which suggests there is latent growth available to DMG Radio.
Lachlan referred to growth opportunities in the existing business and in related media in the announcement of the acquisition.
There are some obvious opportunities to build the existing business but his comment also suggests he and DMGT see DMG Radio as a vehicle for wider expansion into the Australia media. Lachlan will be chairman of the joint venture and therefore will have the ability to direct its strategies.
DMGT apparently has no plans to divest the remaining half of DMG Radio, but one assumes Lachlan would have first right of refusal if it decided to withdraw completely at some point in future.
The attempted privatisation of ConsMedia showed that Lachlan does have large-scale ambitions. He is, in that respect, his father’s son. He now has his beachhead and a proper cash-generating vehicle for those ambitions.
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