Is a Seven-Foxtel combination on the cards?

Market experts believe consolidation in the streaming industry is logical because of the number of players operating. Picture: Nicki Connolly

The $650m Australian listed Seven West Media is back up for discussion when it comes to mergers and acquisitions, but the latest talk is in the context of whether the group combines with Foxtel.

Australian pay television and streaming company Foxtel, owned 65 per cent by News Corp, publisher of The Australian, and Telstra, has previously shown interest in launching an initial public offering for the entertainment company.

However, one option being discussed is a move where Foxtel is reversed into the Kerry Stokes-backed Seven West Media.

The so-called back door listing could be one way that News Corp could see Foxtel make its way to the public market.

A tie-up between Seven West and Foxtel has been considered logical by many, but the question is whether the conditions are right for such a transaction and whether Kerry and Ryan Stokes (chairman and director respectively) are prepared to deal at the right price.

Some believe that the free-to-air broadcaster Seven West Media has always been available for sale, but price aspirations have been high by the Stokes family, the major shareholders.

Seven West has been keen to build a digital streaming business, while News Corp and Telstra are known sellers of at least part of Foxtel.

Market experts believe consolidation in the streaming industry is logical because of the number of players operating.

It is understood that Nine Entertainment and Foxtel held talks in the past six months about Nine buying Foxtel, but that the talks never progressed between the pair, which are historically fierce competitors.

Nine chief executive Mike Sneesby has been exploring content deals and broader strategic options for its streaming service, Stan.

The Australian pay television company Foxtel operates cable TV, direct broadcast satellite TV and streaming services including brands Kayo Sports and Binge that collectively have close to three million subscribers.

When there were plans to float the business last year, its value was considered somewhere between $3bn and $4bn.

Other targets which have been on the Seven West radar are outdoor advertising business Here There and Everywhere, and Southern Cross Media.

In the past, Seven West’s lagging share price has held back its acquisition aspirations.

Barrenjoey and Goldman Sachs have worked for Seven West in the past, but it is understood that previous takeover talks with HT&E have involved management.

For the six months to December, Seven West Media posted a 4.6 per cent fall in its net profit to $114.9m, as revenue slid slightly by 0.5 per cent to $814.5m.

In February, Seven West chief executive James Warburton said he believed that the downturn in the television advertising market would be brief, and the company was well placed to capitalise on the expected bounce back.

He said Seven’s digital assets continued to enjoy strong growth and, with some of the network’s more “onerous” long-term contracts expiring in the coming year, the company would be in a position to generate “significant cash” by the 2025 financial year.