The push by billionaire mining magnate Gina Rinehart for representation on the Fairfax board has become irresistible after she lifted her stake in the company to 18% today, media experts said. But her ability to exercise political influence would likely be diluted by opposition from other board members.
The world’s wealthiest woman is believed to have increased her hold over Fairfax Media by a further 3% in an after-market raid at 4.26pm.
Mrs Rinehart is also believed to have bought at least half of the 78.7 million shares traded on Thursday, quadruple the normal trading volumes. That included a line of 42 million shares sold at lunchtime for 60 cents a share.
Her push to acquire two seats on the board of the publishing house has met with concerted resistance in recent months, but academics and analysts agree the company’s largest shareholder can no longer be denied.
Jason Wilson, Assistant Professor in Journalism and Communications at the University of Canberra, said it was “clear that she’s just going to keep buying shares until it’s an unassailable argument that she ought to have board seats. She’s after more than one and I can’t imagine it’s too far away.
"Once the shareholding gets to 20%, what are they going to do? As time goes on, she’s going to have the board over a barrel, because I’d hate to think what would happen to the share price if she dumped the stock.”
Terry Flew, a Professor of Media and Communications at Queensland University of Technology, agreed that the board’s efforts to resist Mrs Rinehart were on the verge of collapse. “I can’t see anyone else in Australia or internationally who’s particularly interested in investing in an Australian newspaper group, and I can’t see how we could continue to have a situation where the stake would be increased in the manner that it is and representation on the board would not result. I would think that the current board of directors would be feeling very nervous indeed.”
Given the board has refused Mrs Rinehart’s request for a seat on more than one occasion, she might be tempted to launch a takeover bid, said Finola Burke, principal of analyst group Media Forecasters.
“If she gets to 20%, she’d have a very strong argument for two seats,” she said. “There’s a precedent here. Kerry Stokes argued for two seats on the West Australian Newspapers board when he had a 20% stake, and he won that battle. If the Fairfax board continues to stymie her, then she may well go for the whole company - and she’s got the muscle to do it.”
Another media analyst who spoke anonymously said it was understandable that the Fairfax board was “pushing back so hard” given Mrs Rinehart holds a conflicting 10% stake in Channel Ten. “I don’t think it’s a done deal that she’ll get a seat. I think they’ll make her go up as high as 20%.”
Of the current eight-man board, chairman Roger Corbett is thought to be most stridently opposed to Mrs Rinehart’s push for a seat. Mr Corbett is considered a devout believer in the independent ethos for which Fairfax is known.
Mrs Rinehart, on the other hand, regards the Australian media as a creature of the left and intends to change that, Assistant Professor Wilson said. “Those are the signals she has sent out. Yes, there are other shareholders, but do any of them have such a clear project for Fairfax? I don’t think so,” he said. “Yes she might meet resistance in the newsroom, but the newsrooms of the land don’t exert the same power that they did in the days when, for example, they stood up to Conrad Black when he bought into Fairfax.
"Things have changed a lot since then. Journalists are finding it difficult enough to preserve their own jobs. It would take concerted resistance on the part of other shareholders to defy her.”
One media analyst said that Mrs Rinehart would be unlikely to enjoy considerable influence over editorial decision-making with “just a seat or two, given the resistance from other board members. There might be a shift to the right, but it wouldn’t be dramatic.”
Professor Flew said it was also possible that Mrs Rinehart saw an opportunity to reverse the fortunes of an underperforming company. Since 2006, the company’s share price has fallen from $1.73 to 60 cents. “There is the question of whether Fairfax shares are undervalued or whether the company is underperforming with regard to its possibilities,” he said. “Here I’d note the comments of Warren Buffet, the Sage of Omaha, to keep out of Facebook and that at the same time he was investing his funds in newspapers. He’s obviously concluded there’s an opportunity there. He’s a famous counter-intuitive investor.
"I wouldn’t rule out the possibility that the 80% decline in the share price of Fairfax is perceived to be the result of a management that hasn’t grasped its opportunities, and other people, such as Gina Rinehart, think there might be better ways to go with those assets.”
The Australian Financial Review, in particular, had been performing below potential, he said. There was a widely-held perception that it charged too much for online access: “It’s far, far too high relative to both what the market can bear and what the opportunities are. Subscribing to The Economist is now a quarter of the cost of subscribing to the AFR, and I think I know which has the more solid analytical coverage.”
The other issue was whether Fairfax could continue to use a free-access model for the digital versions of titles such as The Sydney Morning Herald and The Age, he said. “Given the scenarios for web advertising, that needs to be rethought. Maybe there’s a perception that things could be done differently at the Fairfax group. And anyway, who else is investing in Australian newspapers? Who is the white knight?”
Andrea Carson, a doctoral student at the University of Melbourne who is researching the future of broadsheet newspapers, said there might be some benefits in having Mrs Rinehart on the board, but from an editorial view her presence should be viewed with caution. “There’s no overtures or commitment coming from Gina Rinehart that she would honour the long-held tradition of editorial independence that has separated the Fairfax board from its editorial staff.
"If she does get two seats on the board, as is her preference, there’s every reason to be concerned that there may be a blurring of the boundaries between the editorial line and the management line, and that’s not good for pluralism in Australia.
"I think she will be able to develop a faction within the board that will increase her influence. I would have an open-ended conclusion about just how much influence she would have.”