This was published 9 years ago
What Bruce Gordon could do with his Channel Nine stake
By Dominic White
Bruce Gordon would have to find more than half a billion dollars in cash to help fund a straight buyout of Nine Entertainment Co, analysts estimate.
That is, if he wanted to take advantage of any change to cross-media ownership laws to attempt such an audacious deal.
WIN Corporation owner Bruce Gordon. He also has major stakes in Nine and Ten. Credit: Michele Mossop
The TV veteran has had a brief phone call with Nine CEO David Gyngell since announcing the purchase. His ultimate intentions are unknown and he has yet to comment.
But the move clearly positions the 86-year-old as a key player in the wave of M&A activity that could be unleashed if the federal government scraps ownership laws.
Those laws include the so-called "reach rule", which would currently prevent Mr Gordon from owning both his regional free-to-air TV network WIN Corporation and a city network such as Nine.
Some observers believe Mr Gordon's move is actually designed as a hedge against the possibility that WIN is forced to pay Nine a higher fee for taking its feed, under their long-standing affiliation deal.
Even if WIN's earnings were depressed as a result of a renegotiation of the deal, which expires in December, Mr Gordon could marginalise the financial impact because Nine's earnings – and likely, share price – would benefit as a result.
What is it is known for sure, is that he believes free-to-air television is undervalued by the market.
That is evidenced by his refusal to sell his 14.95 per cent stake in Ten Network Holdings, which is well underwater, to bidders for the company earlier this year.
Instead he proposed to inject up to $100 million of new money into Ten under a deal in which he could have effectively doubled his 14.9 per cent holding in Ten if the government scrapped the reach rule.
His options for getting greater control of Ten have been limited however by the Ten board agreeing to a 14.95 per cent investment by Foxtel instead, which the competition regulator is due to rule upon on Thursday.
Full takeover
One of the many other options open to him, in the event of media reform, would be to mount a full takeover of Nine and take it private. But it would cost.
A 30 per cent control premium for Nine at its current valuation would value the business at close to $1.8 billion.
Mr Gordon will soon own 14.95 per cent of the company once his circa-$200 million purchase is completed, which means he would have to find $1.4 billion to finance for the remainder of the equity.
Analysts estimate he could borrow as much as $850 million against Nine's consensus forecast underlying earnings of $215 million (Bloomberg) based on an aggressive four-times multiple.
That would leave a gap of $650 million he would have to plug himself. That's only one option for him, of course.
Mr Gordon was listed at 45 in the BRW RIch List for 2015 with a net worth of $1.06 billion. As well owning WIN Corp, he has significant property interests and part-owns a leagues club that has a half-share of NRL club St George Illawarra.