In the 1980s it was fashionable for those who could afford the tuition to send their offspring to Harvard Business School to get an MBA. Students from around the world lined up for the prestigious program, ready to take on the world of business upon graduation.
One graduate, Warwick Fairfax, came from Australia. The Fairfax family owned publishing and television outlets around the country, including the most prestigious of newspapers in Australia, having founded the Sydney Morning Herald in the 1820s. Its classified advertising section was huge, guaranteeing shareholders a suitable return on investment.
But over the years, share ownership had spread to wider family members, as well as public institutions, and turmoil began over editorial policy. Warwick and his mother, however, were somewhat frustrated by the decisions being made. They felt their interests were not addressed well enough. Warwick’s father was dead, leaving a widow, a son, and a family publishing business worth millions, but other people were making the decisions.
So Warwick, fresh with his MBA from Harvard, decided to solve the problem for himself and his mother and buy out all the other shareholders. To achieve this, he needed $2bn, which came from one of the major banks ($1.2bn), and the remaining $800m was raised using Milliken junk bonds. In 1986 this looked like a good deal, as it did through most of 1987 as well, the year the takeover went ahead.
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