Bruce Gordon, Antony Catalano reject Seven West Media’s Prime takeover deal

Seven West’s $64m takeover bid for regional affiliate Prime has suffered a major blow.

Bruce Gordon has rejected Seven West’s offer for Prime.

Seven West Media’s $64m bid to take over its regional affiliate, Prime Media, has suffered a hammer blow, after the Bermuda-based Australian media mogul, legendary WIN Corporation chairman Bruce Gordon, rejected the deal along with emerging regional player Antony Catalano.

In a battle among billionaires for control of the regional asset, emerging media powerbroker Mr Catalano, who has a 14.3 per cent shareholding in Prime with billionaire Alex Waislitz’s Thorney Investments, issued a statement on Monday also rejecting the deal, despite the offer of a 3c a share dividend sweetener by Seven.

“The decision by the Prime board to offer a special three-cent, fully franked dividend does not change our view that the bid price by Seven West Media continues to represent unfair value for shareholders.

“As a result, we intend to vote against the scheme of arrangement.

“It is difficult to see how the special dividend is nothing more than a half year dividend which existing shareholders might otherwise be entitled to. That means there has been no real improvement in the offer which remains below the independent experts fair value range.”

With Mr Gordon holding more than 11 per cent of voting shares in Prime, and Mr Catalano holding 15 per cent, it now appears impossible for the bid to get up in its current form.

A major source of Mr Catalano and Mr Waislitz’s shares have been those purchased from Mr Gordon.

READ MORE: Prime bemoans ad market | Seven’s Prime Media offer too low: Catalano

Seven’s scheme of arrangement requires no more than 25 per cent opposition. But Mr Gordon and Mr Catalano, who have formed a powerful bloc, exceed this limit with 26 per cent of the voting stock, ensuring it cannot succeed. A vote on the scheme is scheduled to take place next week.

In a statement released to The Australian on Monday, Mr Gordon, who only flew into Australia last week, said: “We will not be supporting the scheme of arrangement as we believe that the proposal isn’t good value for current shareholders.”

Sources close to WIN have told The Australian its rejection has come simply because the company believes the Seven offer is a “lousy” deal.

The company holds this view despite the move by Seven to sweeten the deal overnight. But that sweetened offer has not appealed to Mr Gordon.

Media rules

Mr Gordon has also blamed “out of date” media rules for the fact there was only one offer on the table. He also issued a statement that appeared to indicate he would be interested in buying Prime if he could.

“There is only one offer right now for Prime because other potential buyers are constrained by out of date media ownership legislation.

“If the Minister for Communications was serious about the future of regional media companies, he would hasten the removal of the ‘one to a market’ and ‘voices’ rules in regional Australia and let Prime media have more than one potential buyer ... surely that’s more in the interests of Prime’s shareholders.”

Seven spokesman said Mr Gordon’s ambition to control Prime was “not achievable” under the current affiliation agreement.

“The changes Mr Gordon appears to be advocating for are in his favour as he also owns WIN. However, other Prime shareholders would consider the changes inconsistent with the best interests of Prime,” a spokesman said.

“As the largest shareholder of Nine, Mr Gordon’s ambition to control Prime is not achievable under the current Seven affiliation agreement, which contains restrictions on change of control.”

“Currently, Prime outperforms WIN, Mr Gordon’s company in its corresponding markets, so why would Prime shareholders want to put him in charge, particularly given his ambitions to control both licences would diminish Prime.”

Antony Catalano. Picture: Stuart McEvoy.

Seven reiterated its offer was “compelling” and would give Prime shareholders “certainty and a digital future”.

No deal

Prime Media chairman John Hartigan told The Australian that Mr Gordon’s ambitions were “regulatory change” and had very different ambitions to other Prime shareholders.

“Bruce Gordon’s motives are very different to other shareholders. Bruce is playing a ‘long game’ for a legislative change and we respect that.

“But those are very different from other shareholders.”

Seven West Media announced its plans to merge with Prime in October.

Newly installed Seven West Media chief executive James Warburton described the deal, which values Prime at $65m, as a “game-changer” that would maximise reach for advertisers while benefiting shareholders.

“It lets Prime shareholders be part of a bigger broadcast and digital broadcast video on demand (BVOD) solution, and for us it gives a superior and unmistakeable offer over all the other players in the TV market, and it makes us bigger than Facebook and YouTube, based on Nielsen DCR rankings,” Mr Warburton said at the time.

The combined group would be led by Mr Warburton and chaired by billionaire media mogul Kerry Stokes.

An independent report by Lonergan, Edwards & Associates concluded the deal was “not fair” but a “reasonable” transaction. It said that while the transaction was in the best interests of Prime shareholders in the absence of a better offer, the value of the new shares was below the stand-alone value of Prime.

Late last month, regional media proprietor Mr Catalano said the deal was “not far off the mark” but asked Seven to increase its bid to make it “both fair and reasonable”.

Shareholders are set to vote on the deal next week, but the offer is already backed by the Prime board.