Packer gives up Fairfax ambition

Kerry Packer is back in charge

By CNN's Geoff Hiscock
Asia business editor

SYDNEY, Australia (CNN) -- Australia's richest man, Kerry Packer, is giving up his long-term ambition to control the media group John Fairfax Holdings.

Packer, a billionaire known for his interest in polo and gambling, has sold a key 14.9 percent stake in Fairfax worth about $225 million.

Packer controls Australia's most profitable television network, the Nine Network, and a magazine empire.

He has been unable to increase his stake in Fairfax because of cross-media rules that restrict ownership of broadcasters and newspapers in the same markets.

Packer and other media proprietors, including fellow tycoon Rupert Murdoch, have lobbied the Australian government unsuccessfully to ease the restrictions.

Large cash flows from classified ads

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Fairfax is the publisher of the Sydney Morning Herald and the Melbourne Age, two leading daily newspapers which get large cash flows from their classified advertising base.

Fairfax also publishes the financial daily, the Australian Financial Review.

Packer bought into Fairfax cheaply in the early 1990s. The stake he is selling is held by CPH Investment Corp, the company controlled by Packer's private flagship, Consolidated Press Holdings.

CPH Investment told the Australian Stock Exchange Friday morning that it had sold its entire stake in Fairfax at A$4.00 a share. This is a 4 percent discount to Thursday's close of A$4.17.

Packer's publicly listed vehicle is Publishing & Broadcasting Ltd (PBL), which controls the Nine Network and has stakes in Melbourne's Crown Casino, Internet company ecorp and pay-TV provider Foxtel.

Heavy loss from One.Tel collapse

PBL lost heavily from the collapse in late May of the Australian mobile phone company One.Tel, in which it had invested almost $200 million.

Packer's son James and Rupert Murdoch's son Lachlan were directors of One.Tel and claimed at the time of its collapse that they had been "profoundly misled" about the company's financial status.

Murdoch's News Corp was also a substantial investor in One.Tel.

Kerry Packer, 63, has not been well for some time. He had a heart attack in 1990 and underwent a kidney transplant in November last year. In recent years he has left the running of PBL to James, who became chairman in May 1998.

Back in charge

But after the One.Tel disaster, Packer re-emerged and made it clear to investors and analysts in briefings last week that he is once again in charge.

The sale of the 14.9 percent stake in Fairfax will leave CPH cashed up. Packer told investors last week that he was bearish about the market and that "cash is king".

This puts Packer in tune with U.S. Federal Reserve chairman Alan Greenspan, who said on Wednesday that the U.S. economy remained weak and he might cut interest rates again to boost it.

It is possible Packer could return to the Fairfax share register if he can buy in again cheaply. He sold the Nine Network at the market peak to entrepreneur Alan Bond in the 1980s, then bought it back cheaply after Bond went broke.

PBL, which closed Thursday at A$10.28, opened Friday at A$10.20, down 0.78 percent.