Packer raid thwarts Falloon plan

NICK Falloon, the executive chairman of the Ten Network, had been secretly working on a management buyout of the television network before James Packer pounced on 18 per cent of the shares in a lightning sharemarket raid last week.

Mr Falloon was working with US private equity investors Hellman & Friedman, who were to have financed the deal to take Ten private.

It is believed that the Hellman & Friedman chairman, Brian Powers, was in Australia a few weeks ago working on the arrangements. James Packer got wind of the management buyout plans and rushed into the market two weeks ago, forking out $280 million get a stranglehold on the network.

He has since gained the support of a number of Ten's major shareholders to take at least two board seats. Late yesterday, Mr Packer secured Mr Falloon's commitment to resign from the board of Ten.

Mr Packer's plan - as revealed last week in The Age - is to recast Ten's programming strategy, a key aspect of which is to radically cut the network's cost base. That includes plans to axe a new 6pm-to-8pm news and current affairs push. His strategy also involves abandoning Ten's new digital sport channel, One HD.

This has attracted the attention of the Australian Competition and Consumer Commission as One HD is in competition with the Fox Sports service that is owned by Mr Packer and Rupert Murdoch's News Ltd and run on cable operator Foxtel (owned by Telstra, News Ltd and interests associated with Mr Packer).

A little over a year ago, the Ten Network's major shareholder, Canwest, sold out of the company, leaving its share register open to raiders. Several private equity investors ran the ruler over the business but no takers emerged.

Since then there has been renewed interest in free-to-air networks thanks to the allocation of new digital spectrum that has allowed Ten, and its rivals Nine and Seven, to start up second - and third-string channels. Most of these new channels are in their infancy and have yet to register much of a financial return. However, it is expected that in the next few years the free-to-air networks will be allocated more spectrum, which could see the number of channels double.

The potential for free-to-air stations to get a new lease of commercial life was clearly recognised by Mr Falloon and also by Mr Powers, who has extensive experience of Australian media having once been the chief executive of Kerry Packer's Consolidated Press Holdings (which operated Nine), and chairman of John Fairfax Holdings.