Analysts at JPMorgan have supported Seven West Media’s plan to buy Prime Media for $132m.
They said in a research note that the proposed share sale deal should place Seven in a better position to deliver a consolidated national media partnership, with more data across a faster-growing market in terms of affluence and size than a stand-alone metro counterpart.
The analysts said that they had conservatively modelled revenue falling one per cent for Prime in the coming years, but saw potential upside for margins, as costs were removed and the partnership scaled up.
They said that they believed Seven West would achieve synergies at the top end of the targeted $5m to $10m range.
Seven West’s management had earlier flagged earnings accretion in the high-single-digits before cost benefits.
However, they said a key question focused on the prospect of the revenue synergies for the combined entity.
The analysts had said that management declined to quantify any potential impact in the future.
According to advertising spending data from the Standard Media Index, Prime Media has this year led the regional television bookings share, with 30 per cent.
This is followed by WIN at 26.4 per cent and Southern Cross Media at 22.2 per cent respectively.
They said the figures demonstrated the significant reach Prime had regionally, and given
Prime’s regional reach, they believed the deal would give Seven the ability to monetise regional sponsorships, activations, and sports and events as an extension of a metro sale and package.
The analysts said it should also provide greater scale with which to curate and monetise its data once the Code 7+ digital media trading platform and VOZ total audience data integration has been completed.
Seven West tried to acquire Prime in 2019, but the deal was blocked following resistance from major shareholders, which include Bruce Gordon and Antony Catalano’s business interests.
Seven West needs shareholder approval only of 50 per cent for the deal to complete and, so far, more than half of the shareholders able to vote are in favour of the transaction.
It equates to 2.9 times Prime’s adjusted earnings before interest, tax, depreciation and amortisation, which JPMorgan analysts described as “undemanding”.
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