Seven set to acquire Prime Media

Seven West Media (SWM) has entered into a conditional Share Sale Agreement to acquire businesses and related assets of Prime Media Group (PRT) for $131.9 million.

The acquisition will be subject to a vote of the PRT shareholders to be held in December, as per ASX guidelines.

SWM 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.

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
The value of the 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)

Based on current estimates, PRT’s shareholders are expected to receive a distribution of $0.36 per share, inclusive of a special fully franked dividend of approximately $0.26 per share (tax treatment subject to receipt of an ATO Class Ruling).

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.

Major  shareholders, holding in aggregate approximately 43.5% of shares, have confirmed that they intend to vote in favour of the transaction in the absence of a superior proposal.

Antony Catalano and his business partner Alexander Waislitz’s company WA Chess Investments (WCI), recently increased its stake in PRT.  The purchase of additional shares by the pair, which own Australian Community Media (ACM) took their stake in the company from 19.9% to 22.9%.

This was the second time this year that Catalano has increased his stake in Prime Media, following a purchase of almost 19 million shares at $0.225 each, at a total cost of $4.245 million, back in March.

On Friday, SWM refinanced its existing $500 million Syndicated Facility Agreement. The new SFA, underwritten by ANZ and
Westpac, has been increased to $600 million to facilitate the acquisition of the PRT Business. The new SFA is on a materially better basis than the existing facilities, with a 50% margin reduction, reversion to less restrictive terms and conditions, and a three-year term.

The acquisition of PRT is expected to provide improve the proposition of SWM 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


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