Seven West Media, the parent company of Channel 7 has today shocked the market by announcing it has entered into a conditional Share Sale Agreement to acquire all the business and related assets of regional broadcaster Prime Media Group.
If successful, the acquisition would see Seven West Media acquire the Prime Television business, plus the Seven Affiliate Sales business and all their subsidiaries.
The proposed acquisition will now be subject to a vote of the Prime Media Group shareholders to be held in December 2021.
In a note to investors, SWM indicated it “strongly believes in the rationale of a combined SWM-PRT Business, which will create the leading wholly-owned commercial premium broadcast, video and news network across Australia, reaching more than 90% of the Australian population every month.”
This latest deal comes after a 2019 merger proposal by Seven West Media fell apart after the deal was voted against by key Prime Media shareholders, Bruce Gordon and Antony Catalano. Its understood this new takeover proposal now has the support these key stakeholders.
SWM Managing Director and Chief Executive Officer, James Warburton, said:
“This proposal is an important step forward for both companies. SWM and PRT are great partners and have a long, successful relationship. Together, they will offer the best content for our national audience and unmatchable premium revenue opportunities for our clients.
“The acquisition means SWM will become Australia’s leading commercial premium broadcast, video and news network, with the potential to reach more than 90% of Australia’s population each month.
“The proposed transaction is an exciting and transformative development for advertisers and media buyers. It means we will be able to give advertisers easy and seamless access via a single platform to capital city and regional markets,” he said.
Details of the proposal as released in the Seven West Media investor note:
The value of the Prime Media Group (PRT) Business was determined with reference to the current trading price for PRT shares with a premium for control, reduced by the value of cash to be retained by PRT post sale:
- The value of PRT at the bid price is $131.9 million
- This is a 57% premium to the closing PRT share price on 29 October 2021
- By completion, PRT is expected to have approximately $10 million cash on hand with the balance of PRT’s cash held in various subsidiaries to be acquired by SWM
- On this basis SWM would pay PRT $121.9 million on completion
- PRT would be able to distribute net cash on hand to shareholders via a combination of franked dividends or capital return. Further details are included in PRT’s ASX release regarding the transaction, issued today
- Including cash acquired, SWM’s share of expected PRT distributions, and excluding transaction costs, SWM’s net investment in the PRT Business is expected to be approximately $72 million, reflecting a multiple of approximately 2.9x EV/FY21 EBITDA (adjusted for government subsidies)
PRT has indicated that its Board intends to unanimously recommend that PRT shareholders vote in favour of the proposal in the absence of a superior proposal and subject to an independent expert concluding that the proposed transaction is in the best interests of PRT shareholders.
SWM also notes that major shareholders of PRT representing 43.5% of shareholders have indicated their support for the transaction and that they will vote in favour of the transaction, subject to certain conditions outlined in PRT’s announcement lodged with the ASX today.
Strategic rationale
The proposed transaction is highly attractive for shareholders of both PRT and SWM. PRT shareholders achieve a significant premium for their shares, and SWM shareholders will benefit from a transaction that is highly earnings accretive both before and after synergies.
SWM has made significant progress on its transformation strategy, repairing its balance sheet, making the necessary changes for the business to capitalise on a market recovery, and positioning the business strongly for the future. PRT remains a highly strategic opportunity for SWM as it will deliver significant value creation by:
- Providing advertisers with a single platform that will deliver superior audience reach across metropolitan and regional markets
- Unlocking the premium and integrated revenue potential of the combined metropolitan and regional audience base across broadcast and digital platforms
- Enhancing the audience proposition through re-investment in content and expanding the digital delivery of SWM’s offering in regional markets
- Generating estimated cost synergies of $5 million to $10 million on an annualised basis. The costs savings are expected to be fully realised within 12 to 18 months from completion of the acquisition. Revenue upside is also expected but has not been quantified
This post updates.
My comment is not specifically on what is written above BUT I do watch TV in Parkes NSW. So I am hoping that you make take some notice of what I say. There is an ad that comes on for Local Events and it has subtitles. The last few words of the dialogue are left on the screen after the add finishes. These words are “attend any event if you are not feeling well.” Yes I realise the everyone knows the word “don’t” comes just before that BUT the word Don’t does not appear in that subtitle – leaving just a piece of very foolish advise. It would please me if this could be prevented. It really is NOT a good look.