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News Limited decision reflects siege mentality

JOHN Hartigan ought to feel privileged that his boss, Rupert Murdoch, travelled halfway around the world to take his job and usher him into retirement. It is nice to see an octogenarian telling a loyal lieutenant a week before his 64th birthday that maybe it's time to step down.

JOHN Hartigan ought to feel privileged that his boss, Rupert Murdoch, travelled halfway around the world to take his job and usher him into retirement. It is nice to see an octogenarian telling a loyal lieutenant a week before his 64th birthday that maybe it's time to step down.

That Murdoch decided to reclaim the title of chairman of his Australian operations, rather than hand it on internally, speaks volumes about his own intentions not to retire any time soon, and the siege mentality afflicting News Corporation's corporate mind in the wake of its British newspaper scandals and annual meeting confrontations.

Murdoch's decision that he is currently the best man for the job is also a slap in the face to all those senior Australian executives, such as the boss of his Melbourne operations Peter Blunden or chief operating officer Peter Macourt, not to mention apparatchiks who might normally have got the gig.

Ironically Hartigan's replacement as chief executive, Foxtel chief executive Kim Williams, was thrust into that job a decade ago when News Corp became frustrated with his predecessor, Jim Blomfield, at the pay TV group that it co-owns with Telstra (50 per cent) and Consolidated Media (25 per cent).

Williams has considerable experience in government relations as a result of that role at Foxtel, and there is little doubt that Murdoch will want him (as an in-law of Gough Whitlam) to mend some of the broken bridges that prompted the current media inquiry from Julia Gillard's government.

His replacement as Foxtel chief, Richard Freudenstein, was already on the board in his capacity as head of News's Digital Media business in Australia, so he has considerable familiarity with the operations.

For him, though, the new role is pretty much a side-lining. That begs the question of whether News Corp reckons it has done what needs to be done in digital media in Australia or if, as the rumours suggest, shifting The Australian newspaper behind a pay wall has been a double cock-up in terms of few subscriptions and loss of existing traffic to the site.

Lampe lights the way

ASX boss Elmer Funke Kupper has also taken steps to rebuilding relationships in Canberra, with the soon-to-be-announced appointment of Amanda Lampe as his government and corporate relations head.

The ASX has had two massive fallouts with the government since it came to power in 2007. The first was over the introduction of competition, which resulted in a strident campaign including comments from former ASX chairman Maurice Newman.

The second was last year's attempted takeover of the local exchange by its Singaporean counterpart, which the government decided was not in the national interest after fierce lobbying from all sides.

Lampe, no stranger to controversy herself, left her job as Gillard's chief of staff earlier this year amid suggestions that some relationships there had become dysfunctional. She was considered a front-runner for the job as ALP national secretary, but lost out to what appeared to be a factional compromise. Loved or unloved in today's Labor inner circle, there would be no question Lampe knows the corridors of power, and who walks them.

On Hire matters

KERRY Stokes is another media baron who ought to have been in Melbourne this week, but not for anything to do with publishing or broadcasting.

The annual meeting of specialist supplier and servicer of big engines, Engenco, yesterday featured some fascinating comments from its Burnie-based chairman, Dale Elphinstone.

Like Stokes, Elphinstone also has Caterpillar dealerships. More importantly, though, Elphinstone is the stumbling block to Stokes's attempts to privatise the National Hire group with a fairly unsubtle "gun-to-the-head" style offer. Stokes's Seven Group owned 66 per cent of National Hire before it started, so control was not an issue. It does, though, want to be able to delist the company. It is offering $3 a share to investors, with the sweetener that if it gets to compulsory acquisition levels, it will pay $3.60.

Those prices are both well above what National Hire has ever traded at but how surprising is that when two-thirds of the company is out of circulation and there is insufficient liquidity to attract most institutional investors?

Anyway, Elphinstone is both a director of National Hire and the next largest investor with 22 per cent. He has publicly rejected $3, but can most likely make or break the deal by tipping acceptances over the needed 93 per cent level of the $3.60 offer to be triggered.

The affable Elphinstone told his Engenco shareholders that the equipment hire business is booming. He reckoned that reflected nervous times in which companies would rather borrow bulldozers and diggers than actually buy them. When Insider asked him afterwards if that was an oblique reference to the inherent worth of National Hire, he carefully replied that the Coates business would probably be seeing similar circumstances. Coates, a joint venture between National Hire and private equity group Carlyle, provides the lion's share of National Hire's earnings.

All of which suggests that Elphinstone has little disagreement with the $3.66 to $4.30 a share value placed on National Hire by Deloitte Corporate Finance, and which prompted it to call Stokes's bid not fair, but reasonable.

As for Engenco, Elphinstone's family business took control with a partial bid last year, and has recapitalised the group with major equity raisings, reduced gearing from 196 per cent to 21 per cent and returned the company to modest profitability. It is also gearing up in Western Australia for expected major refurbishments of mining company rolling stock, and is keen to expand its locomotive and rolling stock leasing operation to capitalise on miners' needs.

All that explains yesterday's large turnout of investors and stockbroker-types for a company with a market value of only $110 million. Elphinstone noted that the share price has been disappointing (it closed up 0.1? at 9? yesterday), but the one-for-10 share consolidation just approved may help that.


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