News

Seven West Media and Prime to merge

Seven West Media has announced it intends to buy regional media operation, Prime.

At the same time, it is proposing to sell its radio assets in Western Australia to Southern Cross Austereo (SCA) for $28m.

Prime deal 

Prime is currently Seven’s affiliate broadcaster in regional Australia, with Seven contending the proposed transaction would provide advertisers with a single platform that will deliver superior audience reach across metropolitan and regional markets.

In addition, the merger would provide the debt-riddled Seven West Media with expected cost synergies of $11m on an annualised basis to be fully realised within 12 to 18 months of completion. Seven also said there was “potential revenue upside”.

The cost savings would come from duplications between the two businesses including head office operations, board costs and ASX-listing costs. Seven also hasn’t ruled out looking at selling off properties after the deal.

Seven’s acquisition of Prime would be through a 100% scrip-based prime scheme arrangement. Seven would acquire all of Prime’s shares, with Prime shareholders receiving 0.4582 Seven West Media shares for each Prime share they held.

Following completion, Seven shareholders would own 90% of the new, combined entity, with Prime shareholders holding the remaining 10%.

The deal will need to be approved by Prime shareholders, the courts, the Australian Communications and Media Authority (ACMA), and the Australian Competition and Consumer Commission (ACCC).

The merged company will be led by Seven’s new CEO James Warburton and chaired by Kerry Stokes.

Warburton called the deal a game-changer.

“The proposed transaction is a game-changer for advertisers and media buyers and cements SWM’s position as the superior advertising offering,” he said. “Overnight, SWM will be the leading wholly-owned commercial premium network that amasses a monthly Australian audience reach of 18m people.”

Speaking to Mumbrella this morning about the transaction, Warburton said it will halve the workload of media buyers and clients who can now call up and have one conversation to reach 90% of Australians.

He also noted it helps further the work of Boomtown – a joint media initiative which encourages brands to redirect more of their spend to the regions.

And Warburton said he intends for the operation to remain connected to regional communities.

“We’re not suggesting for a moment that Prime goes anywhere,” Warburton told Mumbrella this morning. He did, however, note that outside the separate Prime News offering, the content schedule of the broadcaster is already made up wholly of Seven’s slate.

The deal will also provide Seven with the opportunity to roll out its broadcast-video-on-demand (BVOD) service, 7Plus, to regional markets, he said.

The radio deal

Seven is also looking to divest its Western Australian radio assets, Redwave.

SCA intends to buy it for a cash consideration of $28m, representing enterprise value/ EBITDA (earnings before interest, tax, depreciation and amortisation) multiple of eight.

The combination of the two deals will go some way to helping Seven get on top of its balance sheet, Warburton said.

“Through these actions, SWM will have a strengthened balance sheet, lower debt levels and improved efficiency in the delivery of content across a range of metropolitan and regional platforms.”

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