May Trade Stirs Speculation On Media Mergers

By Glenn Dyer | More Articles by Glenn Dyer

Are the dance partners in Australia’s silliest contest – media merging – starting to sort themselves out or is it really everyone still treading water furiously and hoping? Stockmarket trading in May raised a couple of eye opening – price moves, including on the last day.

As well shares in Kerry Stokes’ Seven West Media raised eyebrows with their continued their charge back to respectability in May and were joined on the final two days of the month by Nine Entertainment.

The duo’s performance left the shares of the other local media companies far behind, though Southern Cross Austereo made a late charge to try and keep up. It’s as though someone is stalking one or both, or all three?

Seven shares ended May on 82 cents, more than 47% higher than the end of April as investors apparently continue to believe that sharing the cricket broadcasts with Foxtel (and at a higher cost per season than its existing tennis broadcast deal) will bring the network fame and fortune.

Seven’s market value is now $1.2 billion and well above the worrying levels around $800 million (and about its debt) earlier in the year.

Seven is in the midst of cutting at least $125 million in costs by June next year and over $60 million by June 30 this year from its $711 million net debt at December 31

The strong rise in Seven shares did not bring one query from the ASX or ASIC.

But Kerry Stokes’ fortune has improved (as it has through the sharp rise in shares in his main company, Seven Group Holdings, up 8.3% in May and 71% in the past year).

That rise has more to do with rising oil prices (Seven Group owns 25% of Beach Energy) and the rebound in activity in the mining industry in WA, NSW and Queensland as well as the pick up in infrastructure spending and construction work.

Seven Group owns the Caterpillar franchise for much of Australia as well as industrial equipment hire companies such as Coates. The 41% of Seven West Media is no longer a big part of the Stokes’ fortune.

What was just as odd was the way Nine shares jumped sharply last week, especially on Thursday when the shares shot up 14 cents or 6.1% on the day to close at $2.41. In fact the shares rose 18 cents from May 29 and the low for the month of $2.23, all without an explanation. The surge this week helped Nine shares add five cent a share in May and boosted the company’s value to $1.98 billion.

Southern Cross shares went for a bit of a toddle in May – to $1.30, up 2.8% on the day and more than 9% in the month (14 cents). Are they about to marry either Seven or Nine? Southern Cross is Nine’s regional affiliate and its two radio networks would make a nice fit.

No such luck for Fairfax Media, the most rumoured marriage partner of both Seven and Nine (at least in the News Corp and Fairfax papers like The Australian and The Australian Financial Review).

Fairfax shares fell half a cent in May to 71 cents and a value of $1.67 billion. Shares in Fairfax’s saviour, Domain Holdings, the property website business, rose more than 4% in May to $3.25 on Thursday (when they dropped 1.8%). Its market cap is around $1.92 billion.

News Corp’s shares in Australia fell 50 cents in May to $21, despite a solid 6% rise in the shares of REA Group, News’ most important asset.

The lack of any price movement in News Corp shares also came as the company completed its restructure and takeover of Fox Sports and merged it into Foxtel, taking a 65% stake and cutting Telstra’s holding to 35%. News Corp’s market value finished at $12.1 billion, REA’s $11.5 billion. News owns 61% of REA.

HT&E owns the Australian Radio Network shares ended at $2.37, up a cent over May with the market value ending at $712 million.

The market reckons its not marrying anyone. But did something stir in the weakest industrial segment on the ASX in May?

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →