Seven Network Joins West Australian Newspapers to Form Billion-Dollar Media Company

The deal could spark a new round of consolidation in Australia's media market, with an IPO and possible buyout of Seven Network rivals looming.


SYDNEY -- In a deal worth AUD$4.1 billion ($4.05 billion) announced Monday, the parent company of Australia’s Seven television network, Seven Group Holdings, is to merge its media assets with West Australian Newspapers, creating Seven West Media, in what Seven and WAN chairman and majority shareholder Kerry Stokes said will be the largest listed Australian-domiciled media company.  
The deal marks a new phase in the consolidation of ownership of Australian media companies with a number of key transactions on the boil this year. That includes a planned $5 billion IPO of Seven rival, the Nine Entertainment Co., and a possible buyout of regional pay TV operator Austar by its metropolitan counterpart, Foxtel.
It comes as the Australian TV market is proving buoyant, with viewers embracing new digital multichannels and the advertising market returning to double digit growth in the past year. Media scions James Packer and Lachlan Murdoch kicked off the merger and acquisition activity late last year jointly acquiring minority shareholdings and board seats in Ten Network Holdings.
Today’s announcement would make the WAN-Seven deal the biggest purchase of Australian media assets ever, according to data compiled by Bloomberg.
“The media landscape is evolving rapidly. Today’s announcement provides a significant opportunity for shareholders to participate in this expanding sector. The proposed transaction to create Seven West Media brings together some of Australia’s best performing media businesses and their management teams,” Stokes said.
“This combined company will be able to do things in Australia that we weren’t able to do before. This gives us the opportunities to take advantage of changing technology, both here and overseas.” he added.
Under a complex deal, SGH will sell its Seven Media Group division to West Australian Newspapers, of which SGH owns 23.4%. The transaction involves WAN issuing shares, repaying a loan and taking on debt.
SGH’s joint venture partner in the Seven Media Group, private equity group Kohlberg Kravis Roberts, will end up with a12.6% stake in the new company. Seven Group Holdings will hold a 29.6% share in Seven West Media. KKR and SGH currently hold 45% each of Seven Media Group.
Seven Group will receive A$1.081 billion in WAN shares at $5.99 per share and A$250 million in convertible preference shares for a total value of about A$1.3 billion under the deal.
Seven West Media will include the Seven television Network, Pacific Magazines, West Australian Newspapers, the Yahoo7 online joint venture, 49% of Perth–based Community Newspapers Group and 33% of Sky News Australia parent company, Australian News Channel.
David Leckie, currently CEO of SMG, will become CEO and managing director of the listed entity and leave the board of SMG.
Seven Media Group’s interest in pay-TV held through its stake in Consolidated Media Holdings will remain as a separate entity within SGH.