The Kerry and Ryan Stokes-controlled Seven West Media is believed to be turning its attention once again to acquisitions, with Southern Cross Media understood to be within its sights.
DataRoom understands that Seven West, which is run by James Warburton, has been in discussions with Southern Cross about an acquisition of the latter’s television division.
As always, any deal would come down to price.
Seven currently has an affiliation agreement in place for its content with its takeover target, regional broadcaster Prime Media, that has up to two more years to play out.
Meanwhile, Southern Cross has recently signed a two-year deal for an affiliation with free-to-air broadcaster Network Ten, which is owned by CBS, after previous partner Nine Entertainment opted to instead join forces with Bruce Gordon’s WIN television network.
The thinking, given the length of both affiliation deals, is that Seven has the opportunity to turn its attention to either a Southern Cross television division acquisition or a Prime Media purchase in two years’ time should it resolve the current impasse with the other Prime shareholder, Australian Community Media, controlled by Antony Catalano.
Seven launched a bid for Prime in 2019, but the deal was thwarted when Mr Catalano amassed a blocking stake of about 14 per cent that has recently increased to about 20 per cent after he bought shares from Mr Gordon.
Seven West has recently paid down a large portion of debt through asset sales and slashed costs after facing major challenges at the onset of the global pandemic, so it is thought any large, transformational acquisitions are likely to be about two years away, despite talks with Southern Cross already happening now.
In February, Seven West reported that it had swung back from a loss to record a $116.4m net profit in the six months to the end of December despite a fall in revenue for the free-to-air broadcaster.
Seven’s net debt fell 42 per cent to $329m in the first half of the 2021 financial year. The group’s current market value is $715m with its share price at 47c.
Southern Cross CEO Grant Blackley is known to be open to a possible sale of its television arm, leaving it as a radio broadcaster and audio company.
For the six months to the end of December, Southern Cross generated $19.5m in earnings before interest, tax, depreciation and amortisation from its television unit.
Prime, also a regional television broadcaster, has a market value of about $92m and makes similar earnings to the television arm of Southern Cross.
Some suspect private equity is also likely to have held talks with Southern Cross. In 2019, Anchorage Capital Partners was also a suitor of Prime Media.
The situation comes after the move by Mr Gordon’s WIN, which has been a longstanding major shareholder of Prime, to sign an affiliation agreement with free-to-air broadcaster Nine Entertainment fuelled speculation he may be eager to sell his company into Nine.
Free-to-air television broadcasters have seen their market values in decline in recent years as they lose viewers to streamed content and advertisers to other forms of media. Yet the pandemic has led to soaring audience numbers.
In New Zealand, listed pay-television group Sky Television Network has launched a strategic review and has hired Jarden for a potential sale after receiving approaches from parties, at least one of which was out of Australia.
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