The German Bauer family seized its chance in 2012 to snap up the iconic Packer magazine empire for a cool half-billion dollars, writes Terry McCrann.
The German Bauer family seized its chance in 2012 to snap up the iconic Packer magazine empire for a cool half-billion dollars, writes Terry McCrann.

Germans head home leaving $500m behind

ANALYSIS

Oh dear: they came, they saw - and sawed - and, well, closed up shop.

Before 2012 hardly anyone in Australia had ever heard of Bauer Media. After this year I doubt that anyone in Australia - or New Zealand - will ever hear from them again. Once bitten, very decidedly twice shy.

It undoubtedly seemed like a good idea at the time; back in what now seems an almost pre-historic time in 2012, the family Bauer seized its chance to snap up the iconic Packer magazine empire for a cool half-billion dollars and change.

The family is now selling it, pretty much for that 'change', leaving the half-bill behind on the table.

Bauer Australia CEO Brendon Hill. Picture: AAP
Bauer Australia CEO Brendon Hill. Picture: AAP

The family paid $525 million for the Packer mags. It's just - at the end, albeit very reluctantly - bought what a long, long time ago used to the Murdoch mags for $40 million. It is selling the lot for what is believed to be $50 million. Do the maths.

All that pretty well captures the decline and - warp-speed - rapid fall of what used to be one of the great media licences to print money: glossy mostly women-oriented magazines. With the coup de grace delivered by the coronavirus.

When Bauer bought what used to be the Packer mags - the Women's Weekly and all the others that had been the foundation of not just the Packer family media empire, but also spawned so many personalities and careers, most notably that of current ABC chairman Ita Buttrose - it wasn't actually buying from Packer.

It bought from the Nine Network, which James Packer had sold in 2006 in one of the sweetest and most spectacularly timed deals in not just downunder media history but Australian corporate history more broadly.

Packer walked away with $5 billion free and clear and he did so less than a year after his father Kerry had died - and even more prophetically just before the late Steve Jobs would unveil the first Apple iPhone, which set in train the course of events that is now shredding those FTA-TV licences to print money (and legacy media in toto).

James Packer sold Nine NEtwork in 2006 in one of the sweetest and most spectacularly timed deals in downunder media history. Picture: Aaron Francis
James Packer sold Nine NEtwork in 2006 in one of the sweetest and most spectacularly timed deals in downunder media history. Picture: Aaron Francis

What Packer then did with that money is an altogether different and less than impressive story. But not this story.

Although Kerry had grown most to be identified with Nine and its fabulous success - its money-printing dominance of free-to-air-TV actually - he always had his softest spot for the mags and their people.

So much so that through his entire life it was always 'Packer and Park Street': he all-but lived and certainly dealt out of the Sydney CBD head office of the magazine publishing empire.

Now, while Bauer didn't buy the mags directly from Packer, by buying effectively indirectly from him, it did break one of the cardinal rules of downunder-dealmaking that I have certainly learned to appreciate over a half-century of spectating: if Packer is selling, don't be a buyer.

That was first made obvious when in the 1980s Kerry got his 'one Alan Bond' - selling the Nine Network to Bond for what was then a very cool, and rare, billion dollars.

He of course got to buy it back very cheaply; if not quite as cheaply as most arithmetically and financially-challenged journalists have popularly tended to have it. And for which of course, son James would be eternally - as in, five billion dollars eternally - grateful he did.

Well, Bauer paid Nine $525 million for the Packer mags in 2012; last year it agreed to buy the former Murdoch mags for just $40 million, around the time it started negotiating its exit from the mags and Australia with this private equity group Mercury.

Arguably, that would have happened eventually anyway; the virus made it certain and made it now. This became clear when Bauer essentially just walked away from its NZ publishing business earlier this year. It just closed up shop. Australia would have been next. Now it is.

MONEY TALKS - A DOABLE DEAL

The sale of what is all-but the entire Australian magazine publishing business is subject to "regulatory approval".

I doubt that ACCC boss Rod Sims will wag his finger. If he does, he will have lost all touch with reality.

ACCC Chair Rod Sims. Picture: Zak Simmonds
ACCC Chair Rod Sims. Picture: Zak Simmonds

The maths alone should tell him something about the reality of media competition in the 2020 world of Google and Facebook domination, far less what is coming through the 2020s like the express train towards you through the tunnel.

Bauer spent $565 million accumulating these mags; it is selling out for $50 million. Does that, Rod, tell you something - anything? - about their 'market power'? With advertisers? With eyeballs?

Preposterously, earlier this year Sims was lecturing about how putting the two lots of mags together would seriously damage competition. He held up Bauer's buying of the mags from Seven while he 'pondered'.

That pondering would have left Bauer in exquisite indecision.

If Sims had banned the deal, Bauer would have saved perhaps $30-40 million on its exit from Australia. True, that would have been only a small part of the near half-bill it was going to lose; but heck even for a rich German family $20-30 million is not to be sneezed at.

Yet, such a ban might have compromised the budding deal with Mercury. It was clearly more 'doable' to being selling them both lots of mags packaged up as one. They would not have wanted to deal with solving that.

In any event, Sims eventually woke up in 2020 and waved the Bauer deal through at the end of March, just as the virus lockdowns arrived.

As they now go, he should wave this second deal through.

terry.mccrann@news.com.au

Originally published as Germans head home leaving $500m behind