Laws put Fairfax in hot seat

THE federal Government's new media laws, which come into effect on Wednesday, could trigger an immediate wave of takeover activity with likely targets including Fairfax Media, Southern Cross Broadcasting, West Australian Newspapers, Austereo and others.

THE federal Government's new media laws, which come into effect on Wednesday, could trigger an immediate wave of takeover activity with likely targets including Fairfax Media, Southern Cross Broadcasting, West Australian Newspapers, Austereo and others.

The laws will be proclaimed one day ahead of a crucial vote on the takeover of Rural Press by Fairfax Media.

The new media laws passed the Senate late last year, and immediately created a frenzy of merger activity in which Fairfax was a key target. Rupert Murdoch's News Corp (owner of News Limited, publisher of The Australian) took a 7.5 per cent stake in the group and Kerry Stokes' Seven Network acquired under 5 per cent.

Media analysts speculated last night about the significance of this timing, given talk that another bid for Fairfax could come from Mr Stokes.

The Seven Network executive chairman is known to be a close friend of the Prime Minister, and a strong supporter of his Government. "It throws the cat among the pigeons," one analyst said.

First movers following next week's proclamation will have an advantage in any takeover process, particularly in regional areas where there is little room for further consolidation.

Media analysts last night said there could be a frenzy of activity in regional markets that might affect groups like Prime, Southern Cross, NBN and Macquarie Media, which has moved to a 13.8 per cent stake in Southern Cross.

Additionally, the Seven Network now holds a 14.9 per cent stake in Perth-based WA News, and appears poised to strengthen its stake in the new media landscape.

Communications Minister Helen Coonan said last night the new laws would "create a framework that will deliver greater consumer choice and a competitive industry in a rapidly growing digital media age".

Yesterday's announcement of the move allows foreign private equity firms KKR and CVC Asia-Pacific to formally exercise control over two of Australia's largest media groups, Seven Media and PBL Media, from next week.

KKR and CVC hold convertible notes that will be exercised on the proclamation date, giving them equity in Seven Media and PBL Media respectively, and full board representation. There is speculation that KKR and CVC will engage in direct cost-cutting after next week.

But the implications could go far beyond PBL and Seven. The Ten Network is in the midst of a sales process, with most of the market focus on a possible buyer centring on private equity firms CCMP, Hellman & Friedman and Merrill Lynch's private equity arm. One report this week also cited US private equity firm Blackstone. The auction for Ten may take place as early as next month.

From next week, overseas companies will have no restrictions stopping them from acquiring iconic Australian media assets. Additionally, existing local media barons can exploit the removal of the cross-media ownership restrictions.

Earlier this week, the Australian Communications and Media Authority (ACMA) found that none of the four major media groups - News, Seven, PBL and Fairfax - were deemed to control two media entities in any of the five major capital cities.

Media analysts said this cleared the major media groups to expand beyond their existing holdings in metropolitan areas.