Ain Keeps Its Powder Dry As Others Take Pot Shots
Sydney Morning Herald
Sunday August 4, 1991
MELBOURNE: They've been dubbed the Melbourne squirrels and are the butt of many a joke in the rough-and-tumble race for the John Fairfax Group.
They also have a fair chance of having the last laugh.
Australian Independent Newspapers has been quietly gathering support while its higher profile rivals - the Conrad Black/Kerry Packer consortium, Tony O'Reilly/John B. Fairfax and Chris Corrigan's Jamison Equity - have been clawing each other in public.
AIN will say only it has exclusive backing with 14 local blue-chip superannuation funds, lesser life offices and fund managers. It has no problems with foreign ownership or owning other media outlets and is happy to sign and abide by charters of editorial independence. Yes, but who is this agreeable outfit? Company records say only AIN was formed from a shelf company in April this year and that its directors are Mr Robert McKay (book publisher), Mr Tom Harley (a relatively junior BHP executive) and Mr Jim Leslie (former Qantas chairman).
The records say AIN's sole $1 share is held by Mr McKay, who, with Mr Harley, was in a push of Melbourne interests who gathered in late 1987-early 1988 when Warwick Fairfax was considering a public float of David Syme, publisher of The Age, to ease the indigestion of paying $1.4 billion for the John Fairfax group.
The going price in 1988 was too high and the group decided to bide its time. The Syme float was dropped in favour of raising equity via $450 million in junk bonds in the US. The Melbourne push widened its own equity base in the last half of 1990 for a tilt at the whole Fairfax group. Mr Leslie joined in December.
Both Mr McKay and Mr Harley are skittish about saying much on the record, but, at the same time, are concerned lest AIN is painted as an old-boys, Melbourne Club push. Their case has been helped by Mr Mark Johnson, a Macquarie bank director, and Mr John D'Arcy, former chief executive of the Herald and Weekly Times, joining the board.
AIN chairman Mr Leslie says the "centre of gravity" of the John Fairfax group would remain in Sydney if the syndicate is successful, and well-known Sydney-based directors will be added to the board. But AIN's Melbourne connections are many and deep.
Mr McKay, 48, went into publishing in 1966 after graduating in economics and business administration from Melbourne University. He started with Sun Books, spent five years as director, general books, of the Macmillan Company of Australia and became managing director of Macmillan London Ltd.
He ran a Melbourne property company in the mid-1980s and is chairman of Macquarie Library Pty Ltd, which produces the dictionary of the same name. He married into a lower-profile line of an old Melbourne family and is a director of the Victoria State Opera, one of the great crossroads of Melbourne's business, political and social circles.
Mr Harley, 35, has a business degree from the Royal Melbourne Institute of Technology and a M.Litt in politics from Oxford. He has worked for the Victorian Liberal Party and was a research officer for Sir Billy Snedden.
He is chairman of Liberal Forum, the group of small "l" Victorian Liberals that includes former federal minister Mr Ian Macphee, and which fought hard against the rise of the party's right under the Victorian Liberal President, Mr Michael Kroger.
A BHP insider says Mr Harley's standing at BHP is higher than his official title as number two in its treasury, and that he's known to heavies such as Mr John Prescott and Mr Brian Loton. Another Big Australian executive noted: "BHP is not known for having people with high public profiles. I don't know that it's frowned upon, it just doesn't happen."
Mr Leslie, 68, is among the 100 or so men in their 60s who dominate the boards of Australia's biggest corporate and public enterprises. He is a former chairman and managing director of Mobil Australia, chairman of Qantas from 1980-89, a director of Boral and Newcrest Mining and chancellor of Deakin University.
It should be remembered the fate of John Fairfax lies mainly with its major creditor, the Melbourne-based ANZ. There are political sensitivities about the buyer and the bidders are all vying to entice Australia's big two investors, AMP and National Mutual.
Mr Leslie has sat at the boardroom table with many heavyweights, including
* Qantas: NSW Labor strongman, Mr John Ducker, Mr John Utz (also chairman of Rothmans, chairman of AMP General Insurance and an AMP director, a director of BP Australia), Federal minister Mr Simon Crean.
* Boral: Mr Bruce Kean (Boral managing director and an AMP director), Mr Keith Halkerston (chairman of Beerworth & Partners and former chairman of John Fairfax).
* National Mutual: Mr Sidney Baillieu Myer (National Mutual chairman and deputy chairman of Coles Myer which has the ANZ's Mr Will Bailey as a director).
Only one superannuation fund, the giant Commonwealth Funds Management, has confirmed that it is backing AIN and the chairman of CFM is a former National Mutual executive, Mr Ian Ferres . The BHP superannuation fund is also thought to be backing AIN, and the long-time chairman of the Big Australian, Sir James Balderstone, is now chairman of AMP.
Another outfit rumoured to be backing AIN is the Australian Industry Development Corp, whose chairman is Melbourne-based Mr Bill Gurry, former managing director of National Mutual Royal Bank, who was formerly in an advisory group to ex-Victorian Premier, Mr John Cain. Mr Gurry is overseas and unavailable for comment, while the AIDC's general manager development investment, Ms Elizabeth Bryan , said AIDC was "not in a position to comment about any role it may or or may not have" in Fairfax.
CFM has reportedly agreed to put $50 million into AIN, but most of the others are expected to put up $15 million to $25 million. Likely backers include Macquarie Bank (also AIN's adviser), the Shell and Mobil superannuation funds. Messrs David and Michael Darling are understood not to be involved.
All that is known about AIN's proposed offer is its $400 million to $500 million in equity.
If successful, AIN foresees a chief executive sitting on a board of about 10 non-executive directors. Macquarie bank's Mr Johnson said AIN would announce its backers and its preferred chief executive when it made commercial sense.
He said there was a "bit of a phoney war going on" in the absence of any timetable on the sale of Fairfax, with the other syndicates taking pot shots at each other if they spied a head above the trenches.
However, the AIN principals appear reluctant to use the big M word, money. At least Mr Trevor Kennedy, head of the Black-Packer syndicate, comes straight out says that "more than anything else, Kerry is interested in making money".
AIN's Mr McKay was prepared to admit, on the record, that his group were aware of mutterings about the syndicate being a "Melbourne" bid. "It's something that's easy to say, but it doesn't reflect the facts. We're not fussed by it." He added: "We want to keep the whole business together. We're not the slightest bit interested in selling any of the individual papers."
Mr Leslie, who was more forthcoming, even on the record, said that AIN did not have agreement from its backers to name them publicly. The same applied to the syndicate's preferred chief executive and its management plan. However, AIN has publicly praised Fairfax's existing management, and is known to be impressed with the managing director of David Syme, Mr Greg Taylor, who is also chairman of John Fairfax's executive committee.
(A former Age editor, Mr Creighton Burns, is an unpaid adviser to AIN because he says they would be good for the industry and Australia. AIN is also close to senior Age staffers, particularly Mr Harley, who was in the BHP"bunker" when it was besieged by Mr Robert Holmes a Court and consequently got to know many finance writers.)
Mr Leslie said he happened to be of an age which "believed that we ought to try to stop this concentration of the media. I'm in it because I think it's worth doing. It's not easy to do it this way (a broadly based syndicate). It's easier if you've one person with a cheque for $500 million."
On his own background, he added: "The longer you are chairman of companies the more people you know and that's helpful, obviously ... it makes it convenient to pick up the phone and talk to people."
Mr Leslie said AIN should not be seen as a "one-city group", but "that's obviously what we have been (seen as) and we don't particularly like that".
The public skirmishing between the bidders was "fairly predictable", with more to come. "The banks have got something to sell through the receiver ... it won't be because they like the colour of their eyes."
AIN was "pretty relaxed" about its profile because it was an Australian group with Australian money, and institutions would be attracted to a company with a broadly spread ownership with no dominant shareholder.
Mr Paul Chadwick, a former Age journalist and Victorian coordinator of the Communications Law Centre, praised AIN for its public stance on editorial independence, its local ownership and being a new player in the media industry.
But he said the other, higher-profile syndicates had been subjected to far great media scrutiny than AIN, such as who they proposed to appoint as chief executive and planning.
"I think AIN is asking for us to take too much on trust so far," he said. "If it's Greg Taylor, let's have that fact out in the open and have him lay out his plans."
Mr Chadwick said it should be publicly stated if the Age independence committee was expressing a preference among the bidders. "It would be nice to see them (The Age) apply the same sort of inquiries to AIN."
(The committee evaluated the four major bidders on grounds of editorial independence, foreign ownership and media concentration. The Black-Packer syndicate is rated as unacceptable, O'Reilly and Jamison as acceptable with some reservations and AIN as preferred.)
An investment manager who controls very large sums of money laughed when asked about AIN. That's right, he said, they're the ones who are keeping a big bag over the head of their chief executive and are going to have an unveiling ceremony.
But sticks and stones should not worry AIN, which has already been sounded out by two competing syndicates, the O'Reilly and Jamison camps. AIN also has coming up briefings to bigger institutions on its plans for Fairfax.
FOOTNOTE: For the record, Mr Harley and Mr Leslie are definitely members of the Melbourne Club, while Mr McKay is understood to be.
© 1991 Sydney Morning Herald