WIN tests waters for move on Nine’s CEO Hugh Marks

Bruce Gordon’s WIN is canvassing fellow Nine Entertainment shareholders about ousting Hugh Marks.

WIN owner Bruce Gordon could sieze control of the Nine Entertainment Co.

Bruce Gordon’s WIN Corporation is canvassing fellow Nine Entertainment Co shareholders about ousting new chief executive Hugh Marks as investor patience with a plunging share price wears thin.

WIN and entities controlled by the Bermuda-based Mr Gordon own 14.99 per cent of Nine’s ordinary voting shares, as well as another 4.9 per cent economic interest via an equity derivative contract.

Fund manager sources said WIN was growing frustrated with the underperformance of Australia’s second-placed free-to-air network and would likely only need to galvanise the support of Perpetual, which owns 15.15 per cent of Nine, to mobilise enough votes to effect a board spill.

A shareholder can call an extraordinary general meeting with 5 per cent of the voting shares and requires more than 50 per cent of the shares voted to spill the board.

This could see Mr Gordon dramatically seize control of the metropolitan free-to-air network once owned by the late Kerry Packer. It is unclear who Mr Gordon would like to install as Nine chief, given WIN chief executive Andrew Lancaster would have to step down from the Ten board, to which he was only appointed last month, if he was to take the reins.

It is understood that Perpetual, which initially bought into Nine at the company’s December 2013 stock market float, has been lobbied by WIN to support a change of leadership.

Sources said WIN believed Nine could be run more efficiently and lamented the group’s shunning of US content, such as the back catalogue to hit series The Big Bang Theory picked up by rival Seven Network, that could be used to plug holes in the broadcaster’s struggling programming schedule.

However, a move to oust the board could equate to granting Mr Gordon control without a takeover premium and Perpetual is not expected to back the proposal at this stage, although the ASX-listed fund manager is becoming increasingly impatient to see a return on its investment. Mr Gordon is currently prohibited from controlling Nine by media regulation that is expected to be reformed by the Turnbull government.

Other institutional investors, while frustrated with the share price, maintain that Nine’s programming schedule for the year was inherited by Mr Marks and therefore say it is too early to judge his performance.

Fund manager Maple Brown Abbott owns 8.3 per cent of Nine, while BT Investment Management holds 5.1 per cent.

Nine’s share price has fallen by 36.2 per cent since Mr Marks took the reins in November, replacing former long-term boss David Gyngell, and the company has more than halved in value since it was listed

The share price is off by 37.9 per cent since WIN seized 13 per cent of the company from US hedge fund Apollo Global Management in October.

Nine had a disappointing ratings performance in the six months to June, which is translating to a declining advertising revenue share for the network, although it gained in its morning schedule led by Today, hosted by Karl Stefanovic and Lisa Wilkinson, and Mornings, hosted by Sonia Kruger and David Campbell.

Nine’s share of the metropolitan free-to-air ad market fell to 35.6 per cent in the six months to June, down from 38.6 per cent, according to the latest KPMG figures. For Nine, this creates a steep challenge and the situation is ­unlikely to reverse in this half given Seven has exclusive access to the Rio Olympics this month.

The start of the 2017 ratings year presents an ­opportunity to refresh the schedule and boost advertising demand, which is partly why Mr Marks has dragged forward programming presentations by four months.

While Nine will see a small boost in revenues from a new ­affiliate deal with Southern Cross Austereo and will earn $20 million in annual simulcast fees from Fox Sports under a new NRL deal, it faces underlying cost increases in relation to the NRL and cricket media rights contracts.

The Australian revealed WIN had courted fellow Nine shareholders about gaining board representation in April but the matter was resolved when Mr Lancaster was appointed as a Ten director.

Relations between Mr Marks and WIN hit rock bottom this year when Nine was sued by its then affiliate partner after the metro network began streaming its content into regional markets.

Nine then shunned WIN, terminating a 27-year relationship, to sign a new affiliate deal with Southern Cross. That left WIN to buy the more lowly rated content owned by Network Ten, although the third-placed metro network has enjoyed strong momentum driven by MasterChef Australia and the Big Bash League.

Over the first four weeks of the new affiliate deals the gap between the Nine affiliate and the Ten affiliate shrunk to 1.6 audience share points from 12 share points in July 2015.