RICH PICKINGS: Lachie stars

What do you get the wealthy entrepreneur who has everything? That's the question that would have confronted Erica Baxter and Sarah Murdoch last week, when their husbands James Packer and Lachlan Murdoch celebrated their birthdays.

There is some irony in the fact that two men who have been so closely linked for the bulk of their adult lives share the same birthday, September 8.

Murdoch, who turned 39, and Packer, who turned 43, have been at various times competitors (mainly through their fathers' various media interests), collaborators and, perhaps most notably, co-investors and directors in collapsed telco One.Tel. And it is just two years since Murdoch and Packer made an aborted attempt to take Consolidated Media Holdings private in a $3.3 billion deal.

Throughout all of this, the pair also appears to have remained good friends and confidants. They attended each other's weddings, and have obviously been close at various times. Murdoch famously told a court examination into the One.Tel collapse that Packer had broken down crying in Murdoch's kitchen, saying "I'm sorry”.

But that's ancient history – even though Packer and Murdoch still face a potential legal claim over the collapse of One.Tel, which both have vowed to fight. These days the scions lead very different business lives, with very different strategies.

While the bulk of Packer's wealth is tied up in two public companies, Crown and Consolidated Media, Murdoch's portfolio is more eclectic and largely private.

And while the movements in Packer's wealth have been much easier to track – his fortune has fallen from $6.10 billion in 2008 to $3 billion in 2009, and then risen to around $4.5 billion at present – the value of Murdoch's fortune is a bit more difficult to pin down.

Let's have a look at his major investments:

DMG Radio Australia

Murdoch's biggest investment is a 50 per cent stake in DMG Radio Australia, which he purchased in November 2009 for $50 million, plus a commitment to take on $62 million of the company's debt.

It is doubtful that Murdoch, who is the company's chairman, would be hugely pleased with the short-term performance of his investment. In the period since he has bought in, ratings at the company's flagship Nova stations in Sydney and Melbourne have fallen, and in March DMG was forced to completely change its Vega stations (also in Sydney and Melbourne) to a classic rock format. Ratings in Sydney have improved since the change, but ratings in Melbourne have fallen.

No doubt Murdoch would see the DMG investment as a long-term play, and turning a station's fortunes around does take time and usually some great talent. 

It should also be noted that Murdoch sold about $US27.6 million worth of News Corp shares in November 2009 to pay for the DMG investment. At current prices, those shares would now be worth $US30.3 million.

Prime Media Group

Billionaire Paul Ramsay is the major shareholder of Prime Media Group, but Murdoch joined the share registry in April 2009, paying $16 million for a 9 per cent stake. At the time, the company's shares were 48 cents and they have since risen 65 per cent, increasing the value of his stake to $21.1 million – a return of 29 per cent in about 18 months.

However, it is worth nothing that the share price has fallen from a peak of 83 per cent in April due to poor results. Prime posted a net loss of $54.46 million for the 2009-10 period, dragged down by a $71.8 million impairment charge on the carrying values of its radio, digital media and outside broadcasting businesses.

Kerry Stokes' Seven Group Holdings has been mentioned as a possible suitor, although this speculation has been rejected by all parties.

Funtastic

Murdoch spent about $2 million buying into toy-maker Funtastic in December 2008 at around 14 cents a share. His purchase came about seven months after the company had received a takeover offer from private equity firm Archer Capital that valued the company at 80 cents a share. But almost two years on, Funtastic shares remain in the doldrums, sitting at about 19 cents.

However, Funtastic's restructuring – which involved the sale of several loss-making units, and improved inventory management and cost cutting – seems to be starting to work, with the company reporting a return to profitability in the six months to June.

Rajasthan Royals

Murdoch was one of the original shareholders in Indian Premier League cricket team the Rajasthan Royals, which was purchased by a conglomerate for $US67 million in 2007. However, the value of the franchise has skyrocketed in recent years. Fresh investment in the team in 2009 valued it at $US145 million, while the sale of two new IPL franchises put the market value of the average team at about $US300 million.

At those prices, Murdoch's original investment of about $US8 million is now worth around $US28 million. The real market value may be slightly lower, but if the IPL competition continues on its growth trajectory, Murdoch's investment should continue to pay off.   

Property

The other big investment made by Murdoch in the last two years was the purchase of Le Manoir, a mansion in the Sydney suburb of Bellevue Hill which he snapped up for $23 million in November 2009. This is one investment that is unlikely to depreciate in a hurry.

Where to next?

The value of the assets listed above is about $130 million, although the debt in the portfolio is unknown (it would appear to be more that $60 million, based on the DMG deal).

Murdoch declined to comment for this article, but his spokesman did point out that he is not a trader of assets, but rather a long-term investor.

While DMG, Funtastic and Prime Media Group are all investments that will take some time to show the kind of returns Murdoch would be hoping for, he does appear to have bought in at the bottom of the cycle.