Smooth succession but it's still the best house in a lousy street
Seven West Media's second-largest shareholder, private equity group KKR, successfully put its 12 per cent stake up for auction late Tuesday with an asking price 7¢ below the company's closing price - a sign of continued tough times for the media industry.
The KKR stake is a legacy from the $4 billion buyout of the company's television and magazine assets in the 2006 boom times. But the holding has dwindled in size due to various corporate restructurings and a partial sell-down in 2011. The precise timing of the move was dictated by the resignation of Seven West Media chief executive Don Voelte. The deal was put on hold until Voelte's departure was announced.
Voelte was for Kerry Stokes what the famous Al "Chainsaw" Dunlap was for the late Kerry Packer. Voelte was the tough guy cost-cutter that was put into Seven to inject some financial discipline.
There is still plenty to do at Australia's best-performing network to recalibrate the business, so either Voelte got impatient or Stokes thought he had done enough to be able to hand on the remainder of the execution of Seven's strategy to long-time executive Tim Worner.
Seven West Media is now on track to take $100 million out in costs. But there will need to be more over time as the broader industry continues to face the pressures of negative cyclical and structural forces. Seven is the best house but in a lousy street.
Voelte was never going stay in an executive role in Seven for the long term but putting him in the job as chief executive for just a year has to be considered unusual.
But billionaire media moguls don't always follow the usual protocols when it comes to running a business, and this includes how they deal with succession. And Seven West's controlling shareholder, Stokes, is no exception.
Having said this, the appointment of Worner to take the top job should be well received.
It was easier for Voelte as an Seven outsider to make the tough decisions - he has no Seven history and no baggage. And as an appointed chief executive (rather than an interim chief executive), he had a real mandate to make changes.
Over the past couple of years, management changes at Seven West have been a bit haphazard. Some of this can be laid at Stokes' feet but some comes with a bit of bad luck. Stokes can be blamed for allowing David Leckie to stay too long - even though he knew his ability was being compromised by his health. Leckie has been one of the best television executives the industry has seen and as such made Stokes a lot of money. Stokes knew Leckie's time was up but was reluctant to move him on.
In 2011 Stokes had been grooming James Warburton to replace Leckie. But Warburton was too impatient to wait for Leckie to go and took an offer to run Ten. Within a year Warburton had been sacked by Ten's chairman, Lachlan Murdoch, and Leckie had moved to a non-executive position on the board of Seven West's parent company, Seven Group.
Worner was next in line in the hierarchy at Seven but Stokes decided to put Voelte into the top role to inject "business discipline" and take the lead role in recommending his successor.
It was a little like reality game show Survivor. There were a list of executives on Seven's management island and one would ultimately win the title. Voelte confirmed the company sought no applications from outside but would not say how many candidates were considered .
Ten recently moved outside the industry to find a replacement for Warburton, while Nine's senior management has been stable for several years under David Gyngell.
The view in Seven was that it had the best team and there was no point in casting the net any wider.
While Worner was the most obvious choice, Rohan Lund, who had been elevated to the role of chief operating officer, was also considered a contender. He is now one of two in the box seat to replace Worner as head of television.
Kurt Burnette is the only other Seven executive who would be considered to have a chance to take this prime position.
Having outlined at least part of the Seven West Media succession plan, Stokes may be called on to outline the future governance of its parent, Seven Group.
There have been clear signs that his eldest son Ryan is being groomed for elevation beyond his present role as chief operating officer to the chief executive role.
While this is not surprising, the timing of this move is now coming into question. Media speculation that long-term Stokes lieutenant Peter Gammell could be ready to move on is gaining momentum. A recent strategically placed profile of Ryan in a national magazine points to attempts by Seven Group to ease his progression into a bigger role inside the company.