CFO World

Seven West Media and Prime merger under scrutiny

ACCC review along with Anthony Catalano's recent investment into Prime raise hurdles for the latest Australian media deal

ASX-listed Seven West Media's (Seven) proposed $64 million takeover of Prime Media is under scrutiny. 

Seven announced its plans last month to merge with Prime by acquiring all its issued shares, in order to become what it claimed would be the leading wholly-owned commercial premium broadcast, video and news network across Australia, reaching over 18 million people each month. It is also planning on divesting itself of its Western Australian radio assets to Southern Cross Media for $28 million. 

The merger looks set to reduce media competition even further, following the massive merger between Nine and Fairfax last year

Seven managing director and CEO, James Warburton, said the proposed transaction is a game changer for advertisers and media buyers and cements SWM’s position as the superior advertising offering.

"Overnight, SWM will be the leading wholly-owned commercial premium network that amasses a monthly Australian audience reach of 18 million people,” he said.

The proposal included a scheme under which Prime shareholders received 0.4582 Seven shares for each Prime share they hold, with exiting Seven shareholders owning 90 per cent of the merged entity and Prime shareholders owner the remainder. 

The media merger is now under the scrutiny of the Australian Competition and Consumer Commission (ACCC), which is inviting industry submissions until 19 November 2019. If the ACCC and shareholders approve, it is expected the merger will occur in early 2020.

However, outspoken media boss and executive chairman of regional newspaper group, Australian Community Media, Anthony Catalano, has since increased his investment in Prime Media this week to more than 10 per cent, a move that has the potential to derail the merger or see Catalano with a seat at Seven’s table. Currently, 50 per cent of Prime shareholders have to approve the merger for it to proceed. 

The news follows Seven’s net loss of $444.4 million in full-year to 30 June 2019.

The ASX-listed media giant published its full-year results in August, confirming $1.56 billion in revenue, a 4 per cent dip year-on-year, along with a $129.3 million underlying group net profit, a decrease of 7.9 per cent on 2018.

However, it was the final net loss of $444.4m that grabbed the headlines, a figure resulting from $573.7 million in impairment charge relating to licences, mastheads, goodwill and other intangible write-offs. Seven West Media (SWM) attributed these to softer advertising market conditions across its TV and newspaper mastheads.

Hardest hit across the divisions was publishing, which reported an 8.3 per cent decline in full-year revenue to $315.2 million, as well as a 25 per cent fall in EBIT to $23m. SWM also reported a one-off $16.8m net loss on the Yahoo7 sale, as well as $22.2m in redundancy costs.

Warburton said at the time he was keen to pursue merger and acquisition opportunities in traditional media and non-traditional areas.

The comments came after a big M&A year for Seven’s rival, Nine, which purchased the Fairfax Media Group and is now looking to secure the remaining portion of Macquarie Media it doesn’t currently own.

Seven West Media recently appointed its first-ever chief marketing officer (CMO), Charlotte Valente, in a move to becoming more audience-centric.

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