Seven Group boss Kerry Stokes has unveiled a $5.2 billion media mega deal that will see him transfer ownership of the Seven television network and media businesses to Perth’s West Australian Newspapers.
Seven Media Group, which includes the Seven free-to-air television network, the Pacific Magazines publishing business and a 50% share in the Yahoo!7 platform, is currently owned by Seven Group Holdings and private equity firm Kohlberg Kravis Roberts.
But West Australian Newspapers (WAN), which is itself 24.3% owned by Seven Group Holdings, will purchase 100% of Seven Media Group for $4.1 billion and raise $1.15 billion in capital to help pay for the deal.
Seven Group Holdings will then own 29.6% of WAN, which will eventually change its name to Seven West Media. Current Seven Media Group boss and long-time Stokes lieutenant David Leckie will be in charge of Seven West Media.
The deal will allow Stokes to consolidate all his media investments in the one vehicle, while allowing Kohlberg Kravis Roberts to exit its Seven Media Group investment.
WAN’s three independent directors have unanimously backed the deal, while shareholders will need to approve it at an extraordinary shareholders meeting on April 11.
“This transaction will transform WAN into the largest listed Australia-domiciled media company,” Stokes said in a statement this morning.
“This transaction is an opportunity for Australian shareholders to gain exposure to some of the best media assets in Australia with the combined business leveraging the highly successful management teams from both WAN and Seven Media Group.”
The move will finally allow WAN to diversify away from its West Australian roots. While the group remains reasonably profitable – it posted a 1.2% increase in first-half profit to $50.1 million this morning – it has been closely tied to the boom-and-bust cycle of the West Australian economy for many years.
Stokes has also signalled a newly-merged Seven West Media would look to pursue further acquisitions in the media space.
The mega deal comes about two years after Seven Group Holdings wrote down the value of its investment in Seven Media Group to zero, following a series of losses racked up by the group during the GFC.
Under the terms of this deal, Seven Group Holdings will get $1.3 billion in shares for its stake. WAN will also assume $1.6 billion of Seven Media Group debt, and will repay a $650 million loan owed by Seven Media Group to Seven Group Holdings.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
