Fairfax

"As D’Arcy would describe the manoeuvre, when the market opened that Monday, Murdoch bid $4 a share for shares that had been trading at $2.70. He made it known he was looking for half of the 63 million Herald shares on issue, and commissioned JBWere to buy them. Millions of shares changed hands, but by the end of the day Murdoch realised he could not force his way into controlling the company because Queensland Press and Fairfax were playing ‘white knight’ to rescue the Herald & Weekly Times. Fairfax mainly wanted to protect its interest in The Age, which far preferred to maintain its cosy competition with the Herald & Weekly Times than with a hostile News Limited. Stokes would later comment, ‘Egos made strange bedfellows.’ Fairfax threw millions at the market and secured enough shares to rebuff Murdoch, but made what Stokes calls a ‘technical error’ of flagging their intentions ahead. While the rescuers were buying with both hands, eyes wide shut, Murdoch sold them a dummy. Suddenly and silently, he started selling — but not through JBWere, the firm that had done the buying for him. Instead, he quietly briefed another stockbroker, May & Mellor. Before anyone at Flinders Street — or at Fairfax’s Sydney office or Queensland Press — realised what was happening, May & Mellor had quietly unloaded Murdoch’s 3.5 million Herald shares at a premium: $5.52 per share. By midday of day two, the shares had slid back to $3.75 and Murdoch had announced he was out of the race, at least for the time being. But he had made $3 million cash between breakfast and lunch."

"enemy more easily, Fairfax’s directors had sacrificed an irretrievable asset in their rush to defend the Herald & Weekly Times against Murdoch. As Stokes and the wily Ken Parker would find out, Fairfax had held a unique advantage for a decade: it enjoyed what was dubbed the ‘grandfathering’ exemption from media laws passed in the 1960s to prevent any one owner from controlling three television licences. Because Fairfax already owned interests in television stations in Brisbane, Sydney and Canberra — and what Stokes calls ‘a cobweb of interlaced shareholdings in regional TV stations’ — before the legislation was passed in 1969, it was allowed to retain the three capital city licences. Latecomers had to be content with two. By buying a 15 per cent stake in the Herald & Weekly Times to fight off Murdoch’s apparent raid, they had breached the ‘grandfather’ clause — and, in effect, would be forced to sell either QTQ-9 in Brisbane or CTC-7 in Canberra. Not only had Fairfax breached the rules, and in doing so abandoned an edge it enjoyed in the media marketplace, but it had also borrowed a fortune to do it. With Potter Partners leading the stampede, Fairfax had spent $50 million on 9.5 million HWT shares. Queensland Press had spent $20 million. Hindsight would show that in doing so they had both squandered the contents of their war chests — paying too much for newspapers that had reached their peak of influence and profitability and were now blundering towards a cliff no-one could then imagine, let alone see. Later, Stokes would link the decline of the once great house of Fairfax with this panicky response to the first Murdoch raid."

"Stokes agreed. Next morning, 10 April, Stokes went to the bank’s main Sydney branch in Martin Place and picked up the cheque made out to Fairfax. He signed a receipt for it, slipped it into his coat pocket and went off to meet the waiting delegation. He had long since learned the value of silence, a tactic that originated when he was surrounded by educated and articulate people fond of giving orders and being listened to by underlings. Falkingham didn’t disappoint in this respect. Stokes’s memory of events goes as follows. As soon as they met that morning, Falkingham said something like: ‘You are going to tell me you need more time to pay.’ Stokes shrugged and made a noncommittal comment. He was happy to wait till right on the deadline. When the clock hit 10 a.m., Falkingham said words to the effect of: ‘Your time is up. I told you to have a cheque ready.’ Stokes, deadpan: ‘Is a bank cheque all right?’ He fished the cheque from his jacket and handed it over. He recalls Falkingham saying: ‘You are full of surprises. You will have a deal by lunchtime.’ The deal was closed, but they kept sparring almost to the end. ‘We had this interesting conversation, with Falkingham saying that [price] won’t get the deal done . . . and I stood there and said you have two choices: you can deal with Rupert Murdoch’s friend [Bruce Gordon] or you can do what you said you would do and sell to me at a higher price. I have not come here to be chiselled and I’ve put $1 million in good faith on the table without a contract. ‘They finally agreed they would accept my offer. And Mr Falkingham said: “Well, Mr Stokes, that gives you 30 per cent but I fear Mr Gordon’s head start [a 14 per cent holding in Fairfax] may be too much for you.”’ Stokes played the Edmund Rouse card — the option to buy the Tasmanian’s 12 per cent stake. ‘I responded: “I wouldn’t worry too much, Mr Falkingham. I already own Launceston TV shares in Canberra and that gives me 42 per cent and I’m pretty confident before this day is over I will have what I need to take it to 50 per cent.”’ And apart from a little argy-bargy with Bruce Gordon, that is the way it evolved.’"

"If Fairfax had to jettison the station, Stokes needed to know how it worked and how it might be improved before he would consider bidding for it. His rule in all things was to ‘buy right’, but the more complex the business was, the harder it was to gauge what good value might be. The elements that make up a television station are less tangible than those of a business that manages shopping centres. In the words of Bob Campbell, who would be moved on from Seven by Stokes years later, television is ‘luck, talent, alchemy and competitive disarray’; the trick is to mix them the right way. Like roulette, it’s easy while you’re winning."

"But in Sydney, it was clear Falkingham thought Fairfax was a cut above dealing with johnny-come-latelies from the provinces. Stokes ignored this thinly veiled snobbery but didn’t forget it. It added piquancy to the deal, which now had his total attention. Another of his ‘sweaty palms’ moments."

"To that end, Stokes put a deal to Fairfax in mid-1987 that valued what would become the Seven Network at around $700 million; he proposed paying a third cash, a third in shares and a third on credit. It seemed a sensible compromise — what he calls ‘real’. (Fairfax had cemented its hold on Seven by buying Melbourne’s HSV7 from Holmes à Court shortly after Murdoch sold it to him.) The supercilious Fairfax executives had amused Stokes when he’d dared buy their Canberra station six years before. Now they astonished him with their unworldliness. Mr Falkingham of the pinstripe suits and patronising manner had gone but he might have handled the sale better than his successors did. Stokes thought the ‘pretty nice combination’ of cash and shares upfront and the sustainable terms he was offering would appeal to a realistic seller. So he was dismayed to get a telephone call at 11 p.m. one night from a Fairfax advisor, Tony Bourke, to say they had done the deal with another bidder: former business reporter Christopher Skase, one of the more colourful figures in a colourful era. When Stokes asked why Skase, the Fairfax man said: ‘He’s got cash.’ When Stokes heard that Skase had given an undertaking to pay nearly $900 million for the network, he almost laughed."

"Most deals rely more on relationships between the parties than on money alone, he says. This lesson had been reinforced when he’d dealt with Fairfax to buy their television station. He’s sure they would have ignored the uncouth Perth shopping centre man if Ken Parker hadn’t quietly introduced him to the venerable Sir Vincent Fairfax, who decided he would pass muster. ‘Most things don’t get done only for money,’ he says. ‘Money has to be there but it’s not always the highest price. Quite often you need something else as well.’"

"When Stokes relayed that story to Bourke, the Fairfax advisor admitted giving him sixty days to scrape up a deposit — and that they were accepting a promissory note for the rest. So, said Stokes, he hasn’t got the deposit and he’s still got to find someone to back him? It was more accusation than question. ‘Two days later,’ recalls Stokes, ‘I pick up the paper and see Skase is off to the US to buy MGM. Then he’s off to Japan to raise money, which he doesn’t get.’ Amazingly, in July 1987, the man with no money was allowed take control of Seven on the strength of a shoeshine and a smile. That was when Stokes realised the game was out of control."