Lachlan Murdoch's private investment company, Illyria, has purchased the remaining 50% of DMG Radio Australia (DMG) from Britain's Daily Mail & General Trust for a reported $120 million, increasing his holding in DMG to 100%.
DMG owns the Nova and Smooth FM radio brands. It has been a painful experience for the founding owner's Daily Mail & General Trust. Having entered the Australian market in 1996, DMG went on a buying spree, outlaying over $550 million to purchase multiple radio licences and create the Nova and Smooth brands.
Murdoch, having outlaid around $230 million for all of DMG, has paid less than half what it cost DMG to set up. Time will tell if buying the rest of the company he didn't already own is a shrewd investment or whether he has overpaid.
The son of News Corporation (ASX: NWS) founder, Rupert Murdoch, Lachlan has, for a number of years, been trying to escape the shadow of his father's media empire and build his own. This growing 'empire' includes holdings in television station and outdoor advertising company Ten Network (ASX: TEN) and toy and film distributor Funtastic Ltd (ASX: FUN).
While we (unfortunately) don't know how much debt or cash is in the DMG business, it is interesting to consider the other media assets the $230 million outlay would buy today.=
With a market capitalisation of $213 million, you could purchase the entire media company APN News & Media (ASX: APN) which includes the Australian Radio Network. Alternatively, you could buy around 25% of Fairfax Media (ASX: FXJ) or 25% of Southern Cross Media (ASX: SXL) which owns the Austereo radio business.
The Foolish bottom line
Warren Buffett values a company on what it is worth to the private buyer. It is interesting to review Murdoch's DMG purchase and consider what he was willing to pay for radio assets in Australia.
As an experienced media businessman, if he has accurately valued the assets then it provides a benchmark for valuing other Australian radio properties.
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Motley Fool contributor Tim McArthur owns shares in News Corporation. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
