The Kerry Packer edition

1. Paul Lennon and the Packer largesse

By Stephen Mayne

Rupert Murdoch's flagship The Australian editorialised after the death of Kerry Packer that he was a protected player who prospered from government favours in an era that is coming to an end. It included the following lines:

Technology is reshaping the way information and entertainment are delivered. And it is increasingly hard for governments to protect established providers from new competitors in the way politicians of both political persuasions helped Packer over many years. The idea that Australia's choice of electronic media should be restricted according to the interests of established providers is economically outrageous, and technologically archaic now every Australian with a broadband connection is able to access music, movies and information on-line from anywhere in the world.

So how ironic is it to have the Murdoch tabloids ripping into Tasmanian Premier Paul Lennon this morning for accepting thousands of dollars' worth of Packer perks and accommodation upgrades during a five night stay in a luxury Crown Casino suite during the Spring racing carnival?

Lennon's sin is licensing UK betting exchange Betfair which is providing new competition against existing incumbent monopoly totes owned by Tabcorp and Unitab. Still, it does demonstrate the point that the Packers will cuddle up to any government to win a lucrative licence. The Murdochs are hardly lily white in this regard, being in bed with the Packers on their Foxtel monopoly and also sharing the spoils of the lotteries monopoly they got together with Robert Sangster from the Wran government.

The Mercury's former chief reporter, Ellen Whinnett, who won a Walkley for her very aggressive pursuit of former Tasmanian Governor Richard Butler, produced today's splash for her old paper and her current employer, the Herald Sun. It was a good get and Lennon is clearly as thick as two planks to think it was appropriate to accept such gifts shortly before awarding the controversial Betfair licence, which is half owned by PBL.

The likes of Laurie Oakes and Trevor Sykes have publicly declared that Kerry Packer never issued editorial instructions that suited his commercial or political interests. Sometimes Packer employees just have the good sense to know what to do.

When Paul Lennon's press secretary Matt Rogers asked The Australian Women's Weekly to do a soft puff piece on the Premier's newly renovated historic home at Broadmarsh, editor Deborah Thomas didn't have to be Einstein to know that the boss would approve. In a similar vein, Jeff Kennett got two soft runs on Burke's Backyard in the lead-up to the 1999 Victorian election when his sweetheart dealings over Crown Casino had delivered Packer a profit of more than $200 million at the time.

Given Lennon's embarrassment about all his Crown largesse, the Weekly's release on January 23 might just add to the suspicion that he's used his office to obtain assets and a lifestyle above and beyond what he ought to enjoy. No ordinary Tasmanian racing fan would get such first-class treatment from the Packers at Crown, that's for sure.

3. The high stakes poker of C7 and the AFL rights

By Stephen Mayne

The share prices of Australia's major media companies have not gyrated much during the ups and downs of the recent C7 court case and AFL rights tender process, but that may change when we get down to the serious business of the end game.

The Australian's John Lehmann had an interesting piece on Saturday which seemed to imply that the AFL would still like to give Nine and Foxtel the rights if Seven and Ten can't deliver on their programming schedule within 120 days of the deal being signed.

Whilst this is seen in some circles as a negotiating bonus for News Ltd and PBL ahead of discussions about which games Foxtel will take from Seven and Ten, the Seven camp take a different view, believing it further demonstrates the point of their C7 case and could further increase any damages. If they hadn't illegally and deceptively colluded to destroy C7, we wouldn't have this problem today, is how the argument goes.

Although News Ltd CEO John Hartigan is keen to settle before he is dragged into the C7 court case as a witness in mid-February, Seven is apparently showing no interest at all as mediation talks on 2-3 February get closer.

Goldman Sachs media analyst Lou Capparelli released a report speculating that C7 could be settled as part of any AFL rights deal Seven and Ten does with Foxtel. Too right it could but Seven boss Kerry Stokes has been buoyed by the damage News Ltd suffered from the dramatic evidence of their executives Ian Philip and Peter Macourt late last year and is looking for a settlement of $500-$600 million.

Even Stokes must have realised that some of the evidence he and key executive Peter Gammell gave won't allow his claim to get anywhere near the stated $1.2 billion mark.

The most likely settlement will involve the defendants, led by News and PBL, picking up the entire $250 million legal bill and then contributing something like $60 million a year from Foxtel or the Premier Sports joint venture for the pay-TV rights to the AFL for the period 2007-2011.

Kerry Packer's last corporate move was to force Seven and Ten to pay an extra $100 million for the AFL rights, but Seven executives are now saying privately that the C7 court case will force the Foxtel parties to effectively pay for this extra cash.

The AFL's churlish attitude to Seven could also see them paying a full price of more than $150 million for the management rights that Seven owns at Telstra Dome as a way of contributing to the settlement. After all, we do still have the odd situation of Seven now being obliged to pay hundreds of millions to the AFL for the next round of television rights, when it is still suing the AFL over losing them last time around.

Stay tuned for what should be some fascinating cliff-top poker in the weeks and months ahead.

7. How big a punter was KP?

By Stephen Mayne

Now that Kerry Packer has moved on, a few more famous casino stories are seeping into the public arena. The Las Vegas Review Journal published a front page obituary the day after his death and this piece from the paper's Norm Clark provides some very interesting insights:

When it came to electricity and James Bond-esque buzz, no one quite lit up Las Vegas like Australian whale Kerry Packer. According to published reports, only the Sultan of Brunei and Adnan Khashoggi, the Saudi arms dealer, were regarded as being in the same league.

After I reported he had lost $US20 million on a subsequent visit (to Bellagio), he came to town with a giant chip on his shoulder. Upset that his media rivals put his stunning losses in big headlines, Packer was out to get even when he came to Las Vegas in early September of 2001 – get even with the dealers, whom he suspected had leaked the information to me.

As retribution, he demanded that hotel reps dealing with him sign a non-disclosure agreement to keep his table action in confidence.

"As a further show of his wrath, he refused to tip the dealers in his two weeks of play," a Bellagio employee told me. Dealers are angry, he said, because Packer "punished dealers for a leak which could have come from a number of departments."

He wasn't any happier by the time he left. Because of the Sept. 11 terrorist acts, the Federal Aviation Administration grounded flights, forcing Packer to stay an extra week. Several sources told me he lost $US29 million, and I printed it. Bellagio boss Bobby Baldwin, who got an earful from Packer over the item, summoned me to his office and disagreed with that number.

There are even more amazing details and some direct quotes from Bobby Baldwin in Clark's column the next day.

Mark Latham should have a quiet smirk on reading this item because these are the leaks that triggered his parliamentary sprays against Packer's excessive gambling in 2000 on 31 August and 7 September. Packer clearly didn't enjoy the publicity at all.

Bellagio was developed by the most famous Las Vegas developer of them all, Steve Wynn. When Wynn toured Crown Casino in 1997, I got to spend an hour with him, Lloyd Williams, Paul Anka and Chris Hemmeter afterwards. During this meeting Wynn declared that Kerry Packer was a personal friend who he played golf with. He also dismissed Australian press reports that he had once been concerned about Packer losses at his Mirage casino in Las Vegas.

The most confusing aspect of all this is that Lloyd Williams once told me that Kerry Packer was nowhere near being one of the biggest gamblers in the world. And Lloyd would have known as for five years he personally ran the biggest high roller casino in the world.

I had an unholy alliance with Lloyd for a while when he gave me scoops and I went soft on him as Herald Sun business editor. The most memorable scoop was probably the page one splash on 6 August, 1996 which began as follows:

A man who gambled $750 million during just four visits to Melbourne is one of the high-rollers who have helped drive Crown Casino to a record profit.

Surely Kerry Packer was never in this league, although it should be stressed the $750 million is turnover, not losses, and when you're betting $250,000 a hand it doesn't take many hours to reach tens of millions of turnover. But in terms of casino aura, bravado and tipping, it's not hard to believe that Packer was a world leader we should all be proud of.

24. Macquarie's 1000 vehicle GPS tender

By Stephen Mayne

Crikey is reliably informed that Macquarie Bank is currently running a tender for 1000 vehicles to have GPS installed. Freight giants such as Toll and Linfox now have GPS in all of their trucks so they can keep an eye on their staff and even track which gear they are in, but why would Macquarie want 1000 systems?

Sure, most luxury cars have GPS as a security measure that allows the police to track a stolen vehicle and trigger the immobiliser when it suits to catch the thief. Pin-striped bankers are not known for jumping in their convertible sports cars and malingering. Then again, Macquarie probably has the biggest fleet of luxury cars for its burgeoning and wealthy workforce, but why would the Millionaire Factory go to the trouble of looking after this from a corporate perspective?

Maybe the tender is part of some sort of infrastructure deal involving buses, trains or airports. Or could it be connected to the world's biggest tollroad empire which is housed inside Macquarie Infrastructure Group?

And speaking of security, we also hear that the big four banks have got together to outsource all their cash handling facilities to one provider. Linfox is considered a leading contender but it should be pointed out that banks move around a lot less cash these days with reduced branches and the dramatic increase in electronic transactions.

Poker machine venues often provide a more lucrative target for banks because of the cash they accumulate, although even they are increasingly moving to card-based credit systems.

26. Kerry Packer's chemical woes

By Stephen Mayne

A lot has been written about Kerry Packer's various business interests over the past two weeks, but one element which is rarely mentioned is his large chemical operations.

Having received $800 million in cash from Alan Bond in 1987, Packer ploughed $130 million into buying Monsanto's Australian's operations, which were renamed Chemplex Australia and based around its West Footscray plant, as you can see here.

Given the giant explosion at Coode Island in 1991, this was always going to be a contentious investment and Packer preferred as little public exposure as possible. The Bracks government, through the Victorian WorkCover Authority which is chaired by James Packer's mate James MacKenzie, gave the controversial West Footscray site a three-year licence in 2003 to operate a "major hazard facility," as you can see here.

But tougher regulations ended local supplies of raw material and The Age reported that the global Huntsman business took a $66 million write-down on the West Footscray plant in September last year.

In what was certainly seen as an odd alliance at the time, Packer sold half the Chemplex Australia business to Salt Lake City-based Mormon Jon Huntsman for $70 million in 1993. The two then joined up later that year to buy Texaco's US chemicals business for $US1 billion, although Packer's original 50% stake in this venture was subsequently cut to 20% or $US200 million. In December 1998 Huntsman Australia also purchased Orica's surfactants business in Botany for $155 million.

The chemicals business has long been highly cyclical, and Packer is said to have enjoyed good returns in some years, but he should have got out of Huntsman before it started making losses in 2001, despite annual turnover of almost $20 billion. This is what The SMH reported in 2003:

Globally, all of the Huntsman operations are being rolled into a single consolidated entity, including the US and local interests with the Packer family. In the middle of 2002 Huntsman began negotiations with bondholders including the Packer family, which had built up a stake of 14 per cent of Huntsman's outstanding bonds.

Bondholders emerged with 49 per cent of the equity, with the Huntsman family retaining 51 per cent and full management control. For the Packer family, this translates to around a 7 per cent holding in the underlying equity of Huntsman Corp, which is to be taken public over the next few years. If not, the Packer family or the other player in Huntsman, vulture fund MatlinPatterson (the same outfit which made a killing out of Anaconda Nickel) has the right to push for either an initial public offering or a sale of assets.

The size of the Packer family's investment is unknown, but the value tied up in Huntsman is approaching $US400 million, ranking it as one of the family's largest single investments.

Fast forward a couple of years and Huntsman was indeed forced to float and the Packer stake debuted at only $US131 million, as you can see from this story in The Age last February. As you can see here, Huntsman shares have performed poorly over the past year, slumping from $US28 to $US17, although it has now recovered to $US20 after finally getting back into profit last year. The latest SEC filings show total assets of $US8.78 billion and total liabilities of $US7.13 billion, so the operation remains highly geared.

Jon Huntsman's fortune has waned in recent years but he was famed for a $US100 million donation to fight cancer in 1995 and Kerry Packer is listed here as having contributed to $US41 million in other pledges that Huntsman rounded up. Australian press reports at the time put his contribution at $13 million.

Jon Huntsman has publicly spoken about his "special relationship" with Packer, but if the 7% stake is still held don't be surprised if it is one of the first things that James Packer sells because it has been a sorry few years for the family's chemical plays.

Copyright © 2022 The Mayne Report. All rights reserved

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