The rise and rise of the Packer empire - Thursday 29th of December 2005

KERRY Packers willingness to wager massive amounts at racetracks and casinos around the world was legendary. But while he also gambled and lost on corporate plays, the massive growth in the value of his business empire over three decades underlines that, in his main arena, he won many more times than he lost.

Serendipity and bad luck both had roles in the Packer saga. His most famous business coup, for example, the sale of the Nine television network to Alan Bond in 1987 for $1 billion and his repurchase of it three years later for $200 million, depended on a hubris-laden Alan Bond paying over the odds for Nine at the peak of the 80s boom.

But it also revealed one of Mr Packers intuitive talents — for knowing when markets were overvalued, and taking the necessary action, even if it necessitated casting off a business that was "part of my life".

Mr Packer also picked the top of the sharemarket boom in 1987, selling many investments ahead of the dramatic plunge in prices in October of that year. His talent for market timing was not infallible. In 1998, for example, he embarked on a property development joint venture with the Western Australian businessman Warren Anderson. Property prices were near record highs and the family lost more than $200 million by the time they exited 15 years later.

Still, the power and wealth that Mr Packer accumulated over 30 years was far from accidental. The sheer volume of deals he was prepared to bankroll also played a part. Towards the end of the 80s he was a particularly active investor, in Australia and overseas, in businesses as remote from the media empire he inherited as engineering and chemicals.

His biggest win arguably was one of the least publicised — the 1986 purchase of Valassis, an unfashionable American magazine advertising insert business. The resale of Valassis in two tranches in 1992 and 1997 is said by Packer insiders to have generated dividends and profits of more than $2 billion.

In many ways Mr Packer was an unlikely candidate to become Australias richest businessman. He was exposed first to his father, Sir Frank Packers Sydney-based newspaper business, and then to television, after Sir Frank won the right to become one of the first television station operators in Australia in 1956. His more intellectual brother, Clyde, was generally expected to take over from Sir Frank.

The tide shifted in the early 70s, with the $15 million 1972 sale of Sir Franks Sydney daily newspaper The Telegraph and its Sunday sister publication to a young rival, Rupert Murdoch. Clyde also fell out with his father and decided to live in the US.

The sale of The Telegraph elevated the importance of Nine in the family business. It was an industry Mr Packer liked. He immersed himself in the business and was the obvious choice to take the reins in 1974 when Sir Frank died. The family placed its media interests in a private company in 1983, valuing them at the time around $200 million. In 1994 they re-floated them in a new company, Publishing and Broadcasting. By then, the path for Mr Packers succession by his son James was already being prepared.

James took over as executive chairman in 1998, after a period under the watchful gaze of an American executive, Brian Powers. Since then the group has expanded into casinos and new media, with James taking an increasingly bigger strategic role. PBLs market value has quadrupled since its market debut, to more than $11 billion.

That an increasingly frail Mr Packer took a back seat to his son in recent years made it easy to underestimate just what Mr Packer snr had achieved, Mr Powers said yesterday.

"It takes charisma, charm, vision, determination, focus and leadership," said Mr Powers, who ran Packer private company Consolidated Press Holdings and then its listed vehicle, PBL, between 1993 and 1998, and who last spoke to Mr Packer a few weeks ago.

"Kerry Packer was remarkable, probably the most genuine human being I have ever met. There was no pretension, no airs: he was honest with people, and very honest with himself."

Although Mr Packers name is synonymous with gambling, sources say it was James who successfully steered the group into casino ownership, first with the $1.6 billion takeover of the Melbournes Crown Casino in 1999, then the 2004 takeover of Perths Burswood casino. The company now has bids to expand into Singapore and Macau. "Gaming was done against Kerrys wishes," one high-level insider said yesterday.

But the shift in focus to gambling has the approval of financial analysts, who believe the guaranteed long-term profit delivered by casinos will offset the inevitable decline in free-to-air TV revenues.

Many analysts believe the success of the two casino complexes PBL is building with the Ho family in Macau will underpin PBLs sharemarket performance over the next few years.

James has also been the architect of PBLs ventures in new media, including some winners — its 25 per cent stake in pay TV provider, Foxtel, its creation of the ninemsn internet portal, its purchase of control of the Seek online classifieds business and its new joint betting venture with Betfair of the UK. There have also been losers, notably an embarrassing $375 million loss on its investment in the One.Tel group.

Though Foxtel has lost more than a $1billion since its launch in 1996, the pay TV monopoly recently reached break even. James reconsidered his career after the One.Tel debacle, but appears to be back and in control. Those close to him say he has been well schooled to take the reins.

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