Seven West Media agrees to sell Pacific to Bauer Media for $40m
Seven West Media (SWM) has agreed to sell its magazine business, Pacific Magazines, to Bauer Media for a cash consideration of $40m, plus $6.6m of advertising for SWM with Bauer.
Advertising spend commitments and content sharing are believed to be part of the ongoing agreement.
The deal is expected to be completed by the end of the year, subject to approval by the Australian Competition and Consumer Commission (ACCC). It comes after the plan was revealed earlier this month, with Bauer Media sources telling Mumbrella the agreement was ‘imminent’.
The proceeds of the sale will be used to pay down SWM’s debt, improving its balance sheet. The company posted a $444.4m loss to the ASX in August. The sale price of $40m represents 4.9 times the enterprise value/earnings before interest, tax, depreciation and amortization (EV/EBITDA) of the business, based on the 2019 financial year.
The deal follows an announcement earlier this month that SWM and Prime intended to merge. Seven CEO James Warburton, who has been in the role just a few months, flagged his intention to hunt for mergers and acquisitions to improve the future of the media business.
As part of the agreement, SWM and Bauer Media have also entered into commercial arrangements, including a $6.6m advertising spend for SWM on Bauer assets over three years. The two companies will also have advertising spend commitments, have agreed to the ongoing production of the Better Homes and Gardens television show and a lifestyle content sharing aspect.
Warburton said the sale is another step towards the future of the SWM brand.
“The sale of Pacific Magazines is another major initiative aligned with our strategy to improve balance sheet flexibility and simplify the operating model to enable greater focus on growth initiatives,” he said.
“The team at Pacific have been at the forefront of our group’s transformation and have done a tremendous job at repositioning their business, but there can be no doubt that there is a greater future within a larger scaled magazine group.”
Brendon Hill, Bauer Media Australia CEO, added: “We are delighted to be able to combine our talent and resources with one of our most admired and respected industry peers. More than ever, scale and superior content is emerging as the differentiator of success in publishing. This transaction will bring the Bauer and Pacific teams greater opportunities to innovate, create and collaborate – and continue to delight their audiences.”
As of yet there has been no confirmation on which key players will follow with the sale, including Pacific boss Gereurd Roberts. Pacific’s titles include Better Homes & Gardens, Marie Claire, New Idea, Who and others.
So what does this mean for Pac Mags staff? Everyone moves to Park Street??
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The very loyal and hard working staff at Pacific were done over, beginning with the EA agreement earlier this year, which many strongly suspect was prepared in full anticipation of this sale. None of that will ever be forgotten or forgiven by the devastated staff. A horrible outcome.
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4.9 times multiple on EBITA and only 40m
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And Noddy ?
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In other news, it appears that Cobb and Co are considering selling off their horseshoeing department, valued at eight thruppenny bits, after tax, bushrangers etc. Potential buyers are Blockbuster, Kodak and Yahoo.
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Another way of looking at this is that Pacific was always about 60% the size of ACP, which was sold for $500m to the Germans. So we can conclude that either Bauer were sold a basket case, an absolute pup worth 1/5th of what they paid, or Pacific devalued from $300m to $40m in the last couple of years, making it the worst performing media business since MySpace… probably both.
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I’ll say it again. This would’ve never happened under Nick Chan. Pacific Magazines jettisoned some of their best players years ago and hired a bunch of muppets. Didn’t work out so well in the end, did it? #failure
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Either a steal or they plan to dump a lot of mast heads. Prop the later..!
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The ultimate mag business!!!! So many agency muffin baskets…..
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Comment of the day.
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Spoken by someone who has been out of the loop for a long while. Pacific are a fully fledged digital company aside from the print products they have. They have really transformed in the last five years, but without enough people to man the forts, and no investment by Seven to back their new direction properly it was certain not to be enough. A lot of good people are feeling like they’ve been misled by SWM.
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People feel they’ve been misled because they have been misled. Many people in tears today over the lies they’d been fed in order to make them give up their redundancy rights. Single mothers who live month to month were in tears today wondering how they will feed their kids when their heavily slashed redundancy payments run out. And all so a greedy corporation can make a fat buck and all so slimy career managers can keep climbing the pole.
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Overpaid
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Will my subscription for magazines be affected by this sale from Pacific Magazines to Bauer?
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@another agency: most likely a combination of both. Bauer absolutely overpaid for ACP and both companies (Bauer and Pacific) have lost significant value since then. Given the $40m sale price is 4.9 times multiple on EBITA , this means Pacific’s EBITDA is only ~$8m/year, and almost certainly going one way. Not a whole lot of value there…..
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Maybe the people that are made redundant should pool their redundancy pay together and buy it back…$40mill’s a steal!
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Hahaha ain’t that the truth! Cheaper than a meat pie
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Spoken like a true dinosaur.
Sincerely,
Kermit The Frog
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That may be true about Pacific having achieved digital transformation, but Bauer have been fumbling around with their digital …tolove network for ages. The problem is, as with most other mag producers, they don’t actually have any concrete plan to monitise the digital side of the business apart from display advertising which is susceptible to ad blocking and destroying the actual experience with aggressive ad takeovers sold to 20 something year old media buyers that are just looking for the latest unseen advert effect so they create insta-synergised-buzzword-buzzword campaigns to their managers who are now lost in a world they don’t understand. Most young media buyers have never even bought a magazine so they just don’t understand the value proposition and this exclude these from their campaign builds. This combined with a dwindling spend on actual journalists and focus on just recycling stories from the last 30 years with a quick refresh means this medium is truly doomed. The numbers of readers are pretty fudged, they extrapolate the possible readership of magazines based on the fact they exist in waiting rooms and “could” be read by multiple readers, not “actual” sales numbers. And when the numbers get real bad, they just stop paying Nielsen to track the downward trajectory. This may seem a harsh analysis, but they had years of warnings to prepare for this and yet have done nothing. #publishingVeteran check out other mumbrella articles on the follies of Bauer it is truly astonishing
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It’s were magazines go to die
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