Seven West Media (ASX: SWM) today announced that it has entered into a conditional Share Sale Agreement to acquire all the business and related assets of Prime Media Group (ASX: PRT) via the acquisition of Prime Television (Holdings) Pty Ltd, Seven Affiliate Sales Pty Ltd and all their subsidiaries (“PRT Business”).
As a sale of a main undertaking for ASX Listing Rules purposes, the acquisition will be subject to a vote of the PRT shareholders to be held in December 2021.
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.
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)
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.
Those muppets Catalano and Gordon better not try to thwart this again. They’re useless and their opposition is only going to be detrimental to PRIME and regional media and in the long term is going to make their shares in PRIME absolutely useless.
If this goes ahead, wonder what this means for the future of Prime’s regional bulletins? They could arguably be the biggest loser in this if 7 reduced the output for regional audiences.
One would think 7 should be looking to the future and where they need to be placed for a new age media company, rather than acquiring a regional network for a increasingly less profitable media business.
I guess this would clear up any possible tie up between 10 and Prime at the end of their respective affiliation agreements if this all goes ahead.
I’d say this is exactly part of that plan. It gives them unrestricted access to a national audience (with the exception of Southern Cross and WIN areas). It means regional profits only need to be split one way, rather than two, making regional more stable (as despite not owning regional licences out of Queensland, affiliation means they have always been interest in regional).
It also protects them from increasingly volatile regional affiliations which have already created market instability and can dilute (or even damage) brand value.
I can’t remember if I can remember reading this during the previous bid:
My reading is that SWM have taken Prime’s valuation a little more seriously this time. Also, if Bruce has his sights set firmly on a Nine/WIN buyout, it wouldn’t surprise me if he recommends the same for Seven/Prime.
To my mind, Catalano is the biggest wildcard at the moment. I’m sure he’ll make his position clear in the weeks ahead.
Seven’s got some weird business priorities. Buying a dead duck regional affiliate which has no real option but to pay them whatever they want in affiliate fees and flogging in-house production capability with Seven Studios. I know what’s more valuable for a digital, future focused streaming business.
The press release Prime Media Group have put out about Seven’s proposal outlines that both Catalano (through his WA Chess Investments company which owns 22.99% of Prime shares) and Gordon (through Birketu Pty Ltd which owns 11.4% of Prime shares) both intend to vote in favour of the proposal unless a superior proposal emerges.
This probably cements a successful deal - 44% of the shareholder base voted for the original proposal in 2019
You have to wonder what has changed with Catalano though, for all the bluster of saying that the original deal undervalued Prime, he had grander plans of making Prime part of his regional media “empire” if the ownership rules changed. Perhaps this is an indicator that neither side of Parliament will entertain changes that would allow an ACM/Prime tie-up
All major shareholders have said they intend to agree to this revised deal, which is sweeter than the one they put forward last year. Good enough for even Thorney/Catalano to say yes.
The government has no intention of fixing the rules, just producing green paper after green paper dragging their feet. They didn’t listen, probably because they saw no political motivation.
If the takeover goes through, and going into speculation territory. I wonder if Seven West Media will intend on rebranding Prime as 7 New South Wales (7NSW) and GWN as 7 Western Australia (7WA)
The above speculation would be similar to rebranding Sunshine Television to 7 Queensland (7QLD) when they bought STQ decades ago.
I have my doubts that the purchase from 7 onto prime will be successful because there are a number of people anxious to save what’s left of localism. I have a feeling that the brand GWN and Prime will be around for a long time yet to come
I’d be willing to predict that if the merger happens, the current Prime7/GWN7 Local News bulletins will probably survive but rebranded as Seven News (LOCATION), as per regional QLD.
Of course I highly doubt there’ll be any new regional services launched, especially in the current media climate.
If this latest attempt by Seven to acquire Prime Media gets the nod, I reckon we’ll almost certainly see the Prime7 & GWN7 brands become part of TV history. Makes sense to have a consistent brand along the entire East Coast + the whole of Western Australia.
In the long run, it’d also be interesting to see if a Seven-owned Prime7/GWN7 would continue to be played out from MediaHub or eventually move to NPC.
What will be really sad to see: Prime7 Possum & GWN7’s Doopa Dog permanently put to sleep, even though those mascots haven’t really been seen outside the 7.30pm “Kids Goodnight” segments since local kids shows got the flick around the end of 2013.