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Bridget Carter

Bauer looks for way to get out of Pacific Magazines deal

Bridget Carter
Bauer’s New Zealand-based Pacific Magazine titles include Women’s Day, Women’s Weekly, NZ Listener, North and South and Next
Bauer’s New Zealand-based Pacific Magazine titles include Women’s Day, Women’s Weekly, NZ Listener, North and South and Next

A bitter battle for survival could soon be playing out between Seven West Media and the Australian subsidiary of Bauer Media.

Bauer agreed to buy Seven West’s Pacific Magazines business for $40m in 2019, which includes about 16 titles such as New Idea and Marie Claire, and in recent days, the transaction was given the green light by the Australian Competition & Consumer Commission to proceed.

But behind the scenes, it is believed that Bauer, which has about 36 titles in its Australian stable such as Women’s Day, Women’s Weekly Harpers Bazaar and Elle, is looking at ways to extract itself from the agreement, including a return to the negotiating table with the Kerry Stokes-backed Seven West to buy the business at a reduced price.

The contract is believed to be watertight, with Bauer on the hook to pay the $40m despite a material adverse change in conditions. It is also understood that Seven is yet to have an approach from Bauer about renegotiating the terms of a transaction as of Thursday.

But some say that if Bauer cannot get out of the contract, it would consider placing its Australian operations into administration, since a $40m payment would send the subsidiary over the edge at a time that advertising revenue has dried up due to COVID-19 disruptions.

This would be an extreme and expensive move for Bauer. Should it execute this plan, it would suggest that the parent assumes the value of its Australian investment — once worth more than $500m and now not even worth $40m.

But if it placed the company in administration, it could potentially buy the business back at a lower price. Another way the situation could play out is that a private equity firm then buys both Pacific Magazines and Bauer Australia and merge them.

Earlier, this was the plan of private equity firm Mercury Capital, but it walked away from an acquisition, paving the way for Bauer to reach a deal with Seven. One theory is that Mercury shelved the transaction because it believed competition watchdog clearance would be unlikely.

It was apparently preparing to outlay $140m for both Bauer Australia and Pacific Magazines, although it would no doubt have negotiate a lower price.

Seven West Media has declined to comment, as did Mercury Capital.

A move to permanently shut Bauer Australia would likely see the loss of about 600 jobs, yet if it proceeds with its transaction with Seven, the New Zealand-based Pacific Magazines titles would be run by Bauer out of Australia.

It comes as the German Company announced 237 staff would be let go permanently in NZ where its magazines, which includes Women’s Day, Women’s Weekly, NZ Listener, North and South and Next, were to shut.

Working on a strategic review of the Australian operations is EY’s Stewart McCallum.

Bridget Carter
Bridget CarterDataRoom Editor

Bridget Carter has worked as a writer and editor for The Australian’s DataRoom column since it was launched in 2013, focusing on capital markets, mergers and acquisitions, private equity and investment banking. She has been a journalist for more than 18 years, covering a broad range of events and topics, including high profile court cases and crimes, natural disasters, social issues and company news.

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Original URL: https://www.theaustralian.com.au/business/dataroom/bauer-looks-for-way-to-get-out-of-pacific-magazines-deal/news-story/71a0d316b8dbf5107d048061ace918e7