Seven West mag deal with Bauer under cloud despite ACCC tick

Bauer is refusing to confirm its purchase of Pacific Magazines will go ahead, despite a green light from the competition regulator.

New Idea and Woman's Day British royal coverage, front covers. Picture: New Idea and Woman's Day

Bauer Media’s $40m acquisition of Seven West Media’s Pacific Magazines is under a cloud, with the deal struck before the economic downturn caused by the coronavirus crisis and the German-owned family business refusing to confirm that the deal will proceed.

With the Australian competition regulator giving the green light to the marriage of the nation’s two biggest magazine publishers on Thursday, Bauer chief executive Brendon Hill is yet to confirm if the deal will go ahead or at the current price. Mr Hill pulled out of scheduled media interviews and failed to return calls.

Seven, which needs a cash injection to pay down its $541m debt pile, is understood to be confident that the deal will go ahead at the current price on April 9.

The Kerry Stokes-backed company believes it has an iron-clad contract and exchanged congratulatory messages with Bauer with after the regulator’s announcement.

Media companies are bracing for a big drop in advertising revenue over the next few months, as companies pullback on spending during the health and economic crisis.

After carrying out a five-month review, the Australian Competition and Consumer Commission said on Thursday it would not oppose the deal as it “was not likely to substantially lessen competition in relevant markets” and would likely save titles that may have closed.

The regulator said it had carefully assessed the impact of the merger, given the close competition between the group’s key magazines, Bauer’s Woman’s Day and Take 5, and Pacific’s New Idea and That’s Life!

While Bauer and Pacific did overlap, ACCC chair Rod Sims said the “significant declines in the circulation and revenue experienced by many magazines are sustained, substantial and likely to continue, resulting in less investment in content and fewer retail promotions”.

“We note that some magazine titles have already closed, and others are likely to follow, regardless of this deal,” Mr Sims said.

“We also note that the content offered by the four key magazine titles, including celebrity news, ‘real life’ stories, puzzles, and food, health and lifestyle tips, is all available from other sources.

“Ultimately, we determined that although there is a notable level of competition between the particular print titles, the transaction was not likely to substantially lessen competition because publishers in other media, particularly online publishers, will increasingly compete with Bauer,” Mr Sims said.

A key issue for the ACCC was the New Idea and Women’s day magazines being owned by the same company, but Mr Sims told The Australian the merger would likely have saved the publications.

“Often people would buy both magazines or people [would be] rusted on to one or the other. That is there wasn’t much switching between the two. It suggests the merger is not going to change that might actually prolong the life of the magazines rather than shortening them.”

Mr Sims told The Australian he viewed the coronavirus crisis as problem for media companies, but had to “look through the issue” for companies in a pre and post-crisis environment because “the crisis will come and go”. But he said for media companies which are currently struggling he would take it into account.

“When you have companies that declare that clearly struggling, as their readership goes down, given the move to digital, then the fact that they’ve got an even bigger struggle now is relevant.”

Seven boss James Warburton welcomed the news, just days after the group dumped its annual earnings guidance as advertising revenue comes under pressure due to the coronavirus hit on the economy.

Mr Warburton said the sale provides $40m in cash, before adjustments and leave provisions. It also enables $6.6m of advertising from Bauer over three years, which “further enhances the value of the sale, allowing the titles to continue to reach the valuable audiences SWM commands” he said in a statement.

Seven is also expected to save about $70m following the recent postponement of the Tokyo Olympics and Paralympic Games until next year.