News Corp. Buys Stake in Australian Newspaper Rival Fairfax

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Rupert Murdoch’s News Corp. said Friday it has bought a 7.5 percent stake in newspaper rival Fairfax, the latest move by industry moguls to take advantage of an overhaul of Australia’s media ownership laws.

News Corp.’s purchase of the Fairfax stake, for about $272 million signals Murdoch’s intention to take part in what is expected to be the biggest shakeup in Australia’s media landscape in 20 years.

News Corp. said the buy-up was not the start of a takeover bid.

“It is purely an investment and is entirely friendly to the existing Fairfax board,” spokesman Andrew Butcher told the Australian Associated Press from New York. “There’s nothing more to it than that.”

Fairfax Holdings Ltd. publishes some of Australia’s most influential newspapers — The Sydney Morning Herald and The Age in the southern city of Melbourne and nationally-circulated The Australian Financial Review. It also owns newspapers in rural regions and New Zealand.

U.S.-based Murdoch’s Australian arm, News Ltd., is the country’s biggest newspaper owner, with papers in every Australian capital and national title The Australian.

Murdoch’s move adds to the frenzy of activity in Australia’s media sector as companies position themselves ahead of the introduction of relaxed media ownership rules, expected early next year.

Parliament this week passed legislation allowing foreign companies to buy Australian media assets and easing cross-media ownership rules that bar newspaper companies from owning television stations, and vice versa.

Critics say the changes will result in a further concentration of ownership in the hands of existing big players, reducing diversity and weakening the media’s role as a government watchdog.

Prime Minister John Howard sought to play down the significance of the activity.

“People buy and sell shares everyday, I just think everyone should calm down,” Howard told reporters.

“I don’t think we’ll end up with greater concentration,” in the media industry, he said.

Fairfax has long been considered a likely takeover candidate because of its open share register.

Murdoch once labeled Fairfax’s classified advertising business “rivers of gold,” and although increased competition from online advertising sites has changed the picture, this revenue stream remains robust for Fairfax.

While News Ltd. would be barred under the new laws from owning Fairfax papers without selling some of its existing titles, analysts said Murdoch may have his eye on Fairfax’s online classified businesses or New Zealand operations — or just be positioning himself to have a voice if another buyer emerges.

“Either it is strategic, in terms of a blocking stake, or Murdoch has a genuine interest in the part of the asset base,” Craig Shepherd, a senior analyst at CommSec, told Dow Jones Newswires. “Murdoch clearly has an eye for internet stocks around the world. There aren’t many of those and Fairfax certainly has some interesting assets.”

John B. Fairfax, the chairman of Rural Press, which owns 140 small papers and the national capital’s Canberra Times, said Murdoch was anticipating “some sort of raid” on Fairfax.

“It is a fairly crafty move by News to be a player in any break up of Fairfax assets should that come about,” said Fairfax, whose family formerly owned the company that still bears his name.

Media action since the new laws were passed includes Publishing & Broadcasting Ltd.’s deal to sell off half its television and magazine business, raising $3.4 billion in capital, and television’s Seven Network Ltd. bought a 14.9 percent stake in West Australian Newspapers Holdings Ltd.

Fairfax said in a statement Friday “there is every reason for investors to see value in Fairfax and its future.”

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