Reuters: Global Markets: Australia's Rinehart may exit Fairfax, shares hit record low

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Australia's Rinehart may exit Fairfax, shares hit record low Jun 26th 2012, 05:20 By Sonali Paul and Victoria Thieberger MELBOURNE | Tue Jun 26, 2012 1:20am EDT MELBOURNE (Reuters) - Australia's richest woman, mining magnate Gina Rinehart, has threatened to dump her strategic stake in Fairfax Media (FXJ.AX) if she doesn't win editorial influence, prompting a 6 percent slide in the newspaper publisher's shares to a record low on Tuesday. Rinehart, a critic of Australia's Labor government and its controversial mining and carbon taxes, is seeking three board seats, and reports that she is balking at abiding by a rule to respect editorial independence have sparked outrage from other shareholders and on both sides of the political fence. Her aggressive push into media since August, including the purchase of 10 percent of TV broadcaster Ten Network (TEN.AX) and the taking of a seat on its board, has also helped stoke the biggest shake-up in the industry in decades. Hit by declining revenues, Fairfax and rival News Corp (NWSA.O) last week announced overhauls of their newspapers, expansions online and massive job cuts. At the same time, the nation's media moguls are jockeying to reposition themselves as billionaire James Packer opts out of the sector to focus on his casino interests. Rinehart, who only last week lifted her stake in the publisher of some of the country's leading broadsheets to 18.7 percent from 13 percent and has said she wants to be regarded as a white knight for an ailing empire, is set to run into resistance. "The fact that you've got 18 or 19 percent of the company doesn't mean you're entitled to anything," said Simon Marais, managing director of fund manager Allan Gray, which owns 8.3 percent of Fairfax. "You must still convince the other shareholders that you're acting in their best interests, and that's the bit we haven't seen," he said. The government has also called on Rinehart to make her intentions on Fairfax clear. "I'll be very, very concerned if the purpose that Ms Rinehart has is to buy influence by buying more shares and junking the charter of independence," Treasurer Wayne Swan, who has traded barbs with Rinehart over taxes, said last week. Rinehart, Asia-Pacific region's richest woman with a fortune estimated by Forbes at $18 billion that stems from her stakes in iron ore and coal lodes, is fiercely opposed to a mining tax that is expected to reap A$9.7 billion in revenue over the first three years, as well as a separate carbon tax that will see power prices hiked. WHITE KNIGHT U-TURN Rinehart's company, Hancock Prospecting, said in an email statement to the Australian Broadcasting Corp that was placed on the ABC website that she could divest her stake if she did not gain board seats. "Unless director positions are offered without unsuitable conditions, Mrs Rinehart is unable to assist Fairfax at this time," the statement said. Fairfax declined to comment on Rinehart's remarks or on the status of talks between her and the board. Fairfax shares slid to a record low of A$0.53, and last traded down 2 percent at A$0.56, valuing the company at A$1.3 billion ($1.3 billion), or nearly half the value it was a year ago. Allan Gray's Marais said he was resigned to the potential that Fairfax shares may plunge if Rinehart dumps her stake but added that he was holding on to his shares. "Eventually the share price will be determined by the profits the company makes, and that's not really affected by her buying or selling shares," he said. The Rinehart/Fairfax drama comes on the heels of billionaire James Packer's imminent exit from the industry. That has resulted in Seven media conglomerate Seven Group (SVW.AX) weighing a bid to gain control of Consolidated Media Holdings (CMJ.AX), taking on Rupert Murdoch's News Corp in a battle for coveted pay-TV assets. In a sign of further turmoil, shares in Seven Group's unit Seven West Media plunged 10 percent to a 20-year low after it replaced highly regarded CEO David Leckie, who is moving on a new role within Seven Group. MINE DELAY Rinehart, who has been battling with three of her four children over control over the family trust, in the same statement blamed the legal fight for holding up plans for her Roy Hill iron ore mine in Western Australia. Hancock Prospecting sold a 30 percent stake in Roy Hill to Asian companies led by South Korean steel maker POSCO (005490.KS) and Japan's Marubeni Corp (8002.T), earlier this year to help fund the project. Hancock said the court fight between Rinehart and her children delayed the sell down of the Roy Hill stakes, which in turn slowed down debt raising for the A$7 billion project, making it more challenging to secure the financing in the current uncertain environment. That has delayed development of the mine, which had been due to start shipping ore in 2014. Hancock said there has been "substantial interest" from Australia's big banks, international banks and some export credit agencies to back the project, and it is trying to line up the financing this year. "However conditions in Australia such as but not limited to its high cost and future additional impositions, such as the world's highest carbon tax and MRRT (mineral resources rent tax), make the raising of such massive debt finance more difficult," Hancock said in the statement to the ABC. ($1 = 1.0015 Australian dollars) (Editing by Richard Pullin and Edwina Gibbs) Link this Share this Digg this Email Reprints

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