After talking the price of Fairfax shares down in past weeks’ Gina Rinehart pounced when the share price fell below 60 cents this week. Rinehart is believed to be the buyer of a parcel of over 70,000 shares, a raid that will give her nearly 20% of the company, and possibly the much coveted board seat she has been demanding.
69.8 million shares, worth $41.9 million, were traded by Morgan Stanley brokers on Thursday and a further 20 million shares were traded on Friday. The trade is thought to be on behalf of Rinehart.
If her holdings end up going over 20%, under company rules, Rinehart will be obliged to make a bid for the whole company.
As Fairfax, like so many other newspapers, struggles to come to grips with the changed business models brought by new media technology (see our other story on Mark Scott) it’s share price has been languishing and profits have not been good. But the group has been pursuing a path of structural change, and experimenting with new publishing platforms to try and find a long term solution for the company, so the profit drop is not unexpected in those circumstances.
If she secured at least one board seat, the company’s biggest share holder, Rinehart, would have a significant say in how those changes progress.
Rinehart’s supporters argue why shouldn’t the biggest shareholder have a say in the running of the company, while opponents fear she will exercise undue editorial control on the output of the newspapers and spoil a long tradition of editorial independence at Fairfax.
John Singleton is one of Rinehart’s supporters, and hopes to be rewarded eventually by the sale of the Fairfax radio stations to his Macquarie Radio Network. If Rinehart gets a seat on the board, Singleton’s wish may now come true, although Singleton is on record as saying he would not pay the current asking price for Fairfax Radio.
If the company remains public there would be many company rules that would hinder Fairfax from selling its radio network for less than it’s value, but stranger things have happened in business. If Rinehart were eventually to buy all the company and take it private, then she could do what she liked with its assets.
There has been no official announcement that Rinehart is indeed the buyer of these shares, but ASX listing rules require such a substantial change in shareholding to be publicly declared within two days of the purchase, so expect an official announcement next week.