Seven West Media and Southern Cross Media to merge, creating new national media conglomerate

Seven West Media, owner of the Seven television network, The West Australian newspaper and The Nightly, will merge with the Southern Cross Media radio network, doubling the size of the company and creating a new national media conglomerate.

Under the agreement announced by the companies on Tuesday morning, Seven West Media chairman and founder Kerry Stokes, AC, will step down in February and be replaced by Southern Cross Media’s chairman, Heith Mackay-Cruise.

Seven shareholders, who will be paid in Southern Cross shares, will emerge with 49.9 per cent of the $417 million listed company. Shares in both companies jumped more than 7 per cent on the news.

“The combination of these two companies brings together the best creators of media content in the country, delivering significant financial and strategic benefits for SWM shareholders,” Mr Stokes said.

“This is an important merger, as the combined company will be better able to serve both metropolitan and regional viewers, listeners, partners and advertisers. It will add strength to each of the combined businesses’ television, audio, digital and publishing operations across the country.”

Greater reach

At a time when Seven’s main competitor, Nine Entertainment Co, is considering selling its radio stations, the Seven merger will expand the company’s reach across Australia with 99 stations broadcasting on FM, AM and digital radio, including MMM, the Hit Network and the LiSTNR on-demand service.

The merger is expected to generate savings between $25 million and $30 million and give the combined company greater exposure to the audiences aged 25 to 54 that are prized by advertisers. The television and radio stations and newspapers will be able to work together to grow all their audiences.

Seven chief executive Jeff Howard will be CEO of the combined company. Southern Cross CEO John Kelly will remain in charge of the radio stations. The board will have four representatives from Seven, including Mr Stokes’ son, Ryan Stokes, and three from Southern Cross. Kerry Stokes said he would act as adviser to the board.

While about two thirds of the company’s revenue will come from television, Mr Howard said there would be more opportunities to grow the company’s newspapers with the addition of radio stations.

The deal will have to be approved by shareholders in both companies. Seven West Media’s largest shareholder, SGH, said it would vote its 40.2 per cent stake for the merger.

One of Seven’s independent shareholders, K2 Asset Management, also expressed support. “The deal complements Seven West Media’s existing assets as it wants to expand its regional footprint,” head of investments George Boubouras said.

“The initial benefits of a merger like this tend to be cost synergies, but it’s after that it’s about maintaining margins and growing the top line, so it’s still a difficult space, but we’re supportive.”