Mining magnate Gina Rinehart has enough equity, but does not appear to have the numbers to become a media magnate.
JOHN Singleton is flustered. The former advertising executive, renowned punter and horse breeder, and a man who has known Gina Rinehart since she was eight years old, has been arguing the case for the iron ore magnate to have a spot on the Fairfax Media board. He decides it's time to offer a history lesson.
It's to the point and littered, as is Singo's style, with plenty of colourful language.
And it leaves little doubt about what he believes is the thinking behind Rinehart, recently anointed the richest woman in the world with a fortune of some $29 billion, and her plans for Fairfax Media.
In the months since she amassed a 13 per cent stake in the publishing company, Rinehart has been pushing for board representation but has been rebuffed by another powerful figure in the Australian business landscape, Roger Corbett.
''Go through the history,'' Singleton begins. ''I met Gina when she was a little girl, when she was with her dad [the mining magnate Lang Hancock]. She's making her dad's dreams come true.''
Hancock felt he struggled to have his voice heard in the corridors of power, Singleton argues, particularly with the West Australian government.
''They had a running battle with [Liberal premier] Charlie Court.
''They opened their own paper in Perth, called The Independent. They hired Maxwell Newton, the foundation editor of The Australian and editor of The [Australian] Financial Review.
''They started The Independent to get their view across so they could bag Charlie Court, they lost a fortune - but they got their view across.
''I think Gina's thinking [is], will I start a paper because there's so much shit being written in the papers, in her opinion.''
Over the past three months, Rinehart has begun battling an increasingly public campaign to win board seats. Her bid has pitted her against Corbett, a highly respected former retailing executive and boss of Australia's biggest retailer, Woolworths, and no shrinking violet himself.
For Corbett, gaining the Fairfax chairmanship was the crowning achievement of a long and successful executive career. Following his retirement from Woolworths, he joined the boards of the Reserve Bank and Fairfax Media.
He helped broker peace during an earlier period of instability, rising to chairman when the board fractured between the Fairfax family, then the major shareholders, and then chairman Ron Walker.
But since his ascent to the chair in October 2009, the company's fortunes have been pummelled by unprecedented levels of change in the media industry.
Despite its expansion into new online businesses and the evolution of its mastheads into online, mobile and tablet forms, Fairfax, with its suite of legacy print assets, has suffered as Australia's $13 billion advertising market switches to online.
By the end of this year more money will be spent advertising online than in newspapers, according to industry forecasts. As a result, under Corbett, the share price has fallen from $1.73 to a low this month of 62.5?, and for former Rural Press shareholders who joined the register during the merger, the value of their holdings has fallen more than 80 per cent.
So, once again, the Fairfax boardroom - and Corbett in particular - is under pressure as its largest shareholder begins to vocalise her discontent.
After two months of Rinehart's duchessing fellow large shareholders and the Fairfax board in private meetings in order to win two board seats, the appointment 10 days ago of former Ernst & Young boss James Millar to the board, instead of Rinehart, appears to have prompted her direct and public criticism of the board and management, in the form of two statements sent exclusively to this newspaper.
Subsequently Rinehart's friends, Singleton and
would-be Fairfax director Jack Cowin (who sits on the Ten Network board with Rinehart), have come out in support of her board tilt and placed the blowtorch to a board apparently determined to deny her a position.
In her first email, Rinehart warned:
''There are questions to be raised concerning the current chairmanship that has presided over both an approx 60 per cent loss in share market value and continuous loss of circulation of all its major mastheads, which in turn affects revenue. Answers need to be given as to how the chairman will address this in the interests of all shareholders, rather than merely hoping for improvements in circulation, revenue and share price or perhaps trying to blame industry conditions.''
She also took the opportunity to confirm that she, through her privately owned Hancock Prospecting Pty Ltd, had lifted her stake beyond the 12.6 per cent reached in February, but warned that the future of her holdings was unclear:
''It is too early to say if HPPL will hold its more than 13 per cent shares in Fairfax or sell them or find some other satisfactory resolution.''
And just in case her dissatisfaction was not fully understood, Rinehart followed up with another statement the next day, which spread the blame for ''poor performance'' to management.
Corbett has resolutely declined to respond to Rinehart's comments. He is believed to prefer to communicate directly with shareholders than make statements in the media and has been contacting institutional investors in Fairfax to shore up support, just as Rinehart's representatives continue to do.
A highly respected businessman close to both individuals said there could be a way forward that would satisfy both parties.
''She's got an investment of a couple of hundred million dollars in a troubled business. Does she deserve a board seat? Yes,'' he said.
''The board has put up a number of issues that need to be resolved. The one about interference with editorial policy ? Gina knows she can't just ring [an editor].''
But she wants to know that she can be part of a broad discussion about editorial policy, even at board level.
The businessman reveals that when Corbett gets back from an overseas trip, it's likely the pair will meet and try to resolve the impasse.
Asked if Rinehart should be offered a board seat, Singleton replies: ''F---ing oath.
''Forget if it's Gina, if it's you or me or Bill Smith or Fred Snerk, if someone owns 13 per cent of the joint they're probably going to want to make money out of it,'' he said.
Singleton says it's an ''insult'' that Fairfax has knocked back her request for a board seat.
Asked what expertise Rinehart would bring to the Fairfax board, Singleton says:
''Making money. That's the idea of having public companies.''
He doubts Corbett is opposed to Rinehart being represented on the board.
''I'd be surprised if Roger wouldn't support Gina.
''I would think the Roger Corbett I know would think someone with 13 per cent should be on the board. That would be my bet. Roger's a Christian, Roger doesn't bet. I think the world of Roger, I would be staggered if he was against it.''
But commentators this week have pointed out that when it comes to the seismic shift from print to digital publishing, arguably neither Rinehart nor Corbett bring direct expertise to the board table.
Rinehart's growing influence on the Australian landscape is visible not just through her startling wealth. Her victory on obtaining special visa dispensation for workers on her Roy Hill mining project shows her increasing clout in Canberra.
Use of that sway is believed to be one of several obstacles that Rinehart would need to overcome to be invited onto the Fairfax board.
She would also have to stay out of editorial matters, at least directly. (Rinehart is suing West Australian Newspapers over its coverage of her dispute with her children over control of the family trust. She has gone to court to try to force WAN to reveal their sources for several news stories.)
If Rinehart lifted her stake to 20-25 per cent either directly or with the support of other investors, the board would have little choice but to give her a seat, Fairfax watchers say. But holding that many Fairfax shares could preclude her from keeping her 10 per cent stake in Network Ten.
On editorial independence, since the divisive reign of controversial Canadian media baron Conrad Black in the early to mid-'90s, the board has been asked to agree to avoid interfering in editorial decisions. A charter of editorial independence was signed by then chairman Sir Zelman Cowen in 1992, and although Corbett's predecessor, Ron Walker, refused to sign the pledge, he gave a verbal agreement.
All would-be directors are advised of the critical importance of editorial independence at the group before joining the board and need to agree to it before joining. Some have questioned whether Rinehart would adhere to it.
But Rinehart could bypass the board and nominate herself and possibly Cowin directly. Corporate governance specialist Dean Paatsch, director of Ownership Matters, says Rinehart could call an extraordinary meeting to decide the matter at any time.
''If she had the numbers, she would have called an EGM [extraordinary general meeting] by now,'' Paatsch said.
One fellow major shareholder, funds management group Allan Gray, headed by Simon Marais, has expressed some sympathy for the mining magnate's board tilt, although questions remain about whether Allan Gray's super-fund clients would agree.
In earlier comments to BusinessDay after Millar's appointment, Marais expressed disappointment that the board had not consulted investors before the announcement and said he would not commit to voting in support of Millar's appointment at the annual meeting. ''I share the sense of frustration that they have gone and appointed what appears to be a mate of theirs,'' he said at the time.
''We need a tough outsider who has a history of shaking things up. You can't argue that the company has been massively well managed over the last five years,'' he added.
One business associate also questioned whether Mrs Rinehart had made a strategic error by letting it be known that her media interests were sparked more by the influence they could wield, rather than regarding them purely as an investment.
Nevertheless, when asked who was likely to win the battle for control, several leading business figures backed Mrs Rinehart, and not only ''because she does not like to lose''. Corbett's supporters said he was equally stubborn and pointed out that he had a fiduciary duty to defend the company's best interests.
Neither the board nor Mrs Rinehart have confirmed whether any of these issues are sticking points, with Mrs Rinehart focusing her attack on Fairfax's financial performance - an issue plaguing investors as the company seeks to convince the market about the effectiveness of its turnaround strategy.
Asked where he would put his money in a battle between Gina Rinehart and Roger Corbett, Singleton pauses.
''Roger's a friend of mine and I admire what he did with Woolworths,'' he says. ''If you had to run Woolworths, I'd have Roger as one, Gina nowhere.
''If I had to make money out of Fairfax? In business they're both really good business people - as far as Fairfax, I think Roger has [only a small number of shares], Gina has 13 per cent, I'd back Gina.''