30 Sep Kerry Stokes to depart Seven after merger with Triple M owner

Source: SMH

By: Calum Jaspan

Kerry Stokes’ Seven West Media plans to merge with Australia’s biggest radio company, Southern Cross Media, in a deal that would create a $415 million television, radio and publishing group, before the billionaire exits the media business he created.

The tie-up, a complex share swap, will result in Southern Cross controlling the combined business with a 50.1 per cent majority stake, while Seven shareholders will own 49.9 per cent.

Southern Cross owns the Triple M Network as well as the Hit Network, which includes stations such as Melbourne’s The Fox, while Seven owns The West Australian newspaper and the Seven Network, which has AFL and cricket broadcast rights.

Under the proposed deal, which will need to be approved by a majority of Seven’s investors at a vote in coming months, Seven shareholders will receive 0.1552 Southern Cross shares for every Seven West Media share they own, the companies said on Tuesday morning. The deal, which is subject to regulatory approval, is expected to be completed by early next year.

On completion, the combined company will be run by Seven chief executive Jeff Howard, with Southern Cross chief executive John Kelly to head its audio assets.

Seven chair Kerry Stokes, its biggest investor and one of the most powerful men in Western Australia, will step down from the merged companies’ board in February, with Southern Cross chair Heith Mackay-Cruise taking over. However, his family will retain a seat at the table, with son Ryan, chief executive of the Seven Group, remaining a director to represent the family’s 20 per cent stake.

Stokes backed the proposed deal on Tuesday and said it would bring significant financial and strategic benefits to shareholders.

“This is an important merger, as the combined company will be better able to serve both metropolitan and regional viewers, listeners, partners and advertisers,” he said in a statement.

While the departure of the 85-year-old billionaire from the board has prompted immediate speculation about whether the family may cash in and exit its stake in the media group, Howard said he has not been privy to any such discussions.

Seven is also the largest shareholder in Southern Cross’ main rival, ARN Media, and both have long been touted to merge. However, as ARN shares have floundered in recent months, Southern Cross’ stock soared as its finances improved, making a share swap more attractive for Stokes.

Speaking to this masthead after an investor call on Tuesday morning, both Howard and Kelly said the tie-up was a result of several years of consolidation talks.

If confirmed, the merged company would retain Seven’s rank as the nation’s fifth-largest media business, behind News Corp, Nine, oOh!Media and IVE Group, according to their market values before the deal was announced.

Both companies’ shares jumped on the news, with Seven up 7.1 per cent and Southern Cross 3 per cent by early afternoon, having soared by more than 10 per cent in early trade.

However, not everyone welcomed the deal. Gabriel Radzyminski, managing director of Sandon Capital, which owns 11 per cent of Southern Cross, slammed the proposal, citing its potential to destroy recent growth for SCA. His firm has agitated for change on Southern Cross’ board for months – but luckily for the radio group, as Seven’s acquirer in the scheme-of-arrangement-structured proposal, it doesn’t need shareholder approval to go ahead with the deal.

Local media companies such as Seven must bulk up or be eaten alive by international streaming juggernauts, said Ben Willee, media director of advertising agency Spinach.

“This merger feels unusually smart [as] the overlap in sports programming gives a strategic foothold,” while the combined scale of Seven and Southern Cross’ digital streaming services will make advertising clients’ campaigns more efficient, Willee said.

“Media companies are their own biggest clients, and now they can also unlock the power of cross-media promotion.”