Seven West grabs Prime stake as takeover tanks
Seven West Media has snapped up a cornerstone stake in Prime Media after a proposed $64m merger collapsed.
Billionaire businessman Kerry Stokes has moved to salvage something from the collapsed $64m merger between his Seven West Media television network and Prime Media, snapping up a cornerstone stake in the regional broadcaster.
Stokes-controlled Seven West Media said that it had emerged with a 14.9 per cent stake in affiliate partner Prime, just hours after its bid for the regional player failed to secure investor support.
The merger, which would have seen Seven take control of Prime’s regional reach, faced resistance from the broadcaster’s major shareholders, rival regional media players Antony Catalano and Bruce Gordon.
But in an unusual agreement, Seven acquired 54.6 million shares in Prime from Spheria Asset Management, in exchange for the issue of 30 million new shares in Seven.
As a result, Seven is now Prime's biggest shareholder, giving it a role in any future industry consolidation.
Mr Catalano, who bought Fairfax Media's former regional newspapers with billionaire investor Alex Waislitz mid-year, is close behind in second spot on Prime’s share register with a 14.57 per cent stake.
Mr Gordon, the chairman of regional media group WIN Corporation, is Prime's third-biggest investor with a 11.59 per cent shareholding.
Prime's outgoing chairman John Hartigan expressed his frustration with the failed takeover, telling shareholders at Thursday's meeting that it was a “disappointing outcome for the majority of Prime shareholders and for the regional television industry in general".
“The majority of shareholder feedback since the announcement of the special dividend (of 3c a share) has been positive and indeed supportive of the proposed merger with Seven.
“Had interests associated with Mr Gordon and Mr Catalano not voted, then based on proxies received to date the scheme would have been approved by shareholders,” said Mr Hartigan, who stepped down at the end of the meeting in Sydney.
Seven chief executive James Warburton, who was tasked by Mr Stokes to overhaul the loss-making free-to-air TV broadcaster and publisher, said the investment in Prime would “provide stability for the business, to support regional Australia and regional news”.
“While we’re disappointed with the outcome of today’s vote, we remain committed to Prime,” said Mr Warburton, who took over the helm in mid-August.
“As Prime itself has said, the business is under pressure to meet regional Australia’s needs and today’s outcome is an unfortunate result for them and their shareholders. “We look forward to continuing our longstanding relationship with Prime, delivering outstanding content for them in 2020.”
Seven's surprise deal with Spheria coincided with the competition regulator’s announcement that it had concerns about Seven its $40m sale of its Pacific Magazines business to publisher Bauer Media.
The Australian Competition & Consumer Commission warned that the tie-up, which would bring rival titles such as Woman’s Da, New Idea, Take Five and That’s Life under one roof, might lead to higher prices or lower quality magazines.
Mr Warburton faces a busy few months to change the ACCC’s mind, and find new revenue streams after his Prime deal was scuppered. Mr Catalano was pleased that Seven's takeover of Prime was blocked, and welcomed the group’s arrival on Prime’s share registry.
“I think for all shareholders it protects the long-term value of the company because it secures a long-term affiliate arrangement between the two companies, given that Seven is now a shareholder,” he told The Australian.
Mr Catalano said Seven’s investment in Prime showed that it was an “asset worth owning”, and urged Prime to work with his publishing business ACM, which has 170 titles and online operations.
“ACM can and will be good partners for Prime wherever possible, and I think in the interest of all shareholders we should explore all collaboration and partnership deals where possible,” he said.
The former boss of online property listing group Domain also called for a “refresh” of Prime's board, noting that they unanimously backed Seven’s takeover, and said he would seek representation on Prime’s board.
Reclusive media mogul Mr Gordon announced last week that he would vote against Seven’s takeover offer after Mr Catalano publicly criticised the offer, plus a 3c special dividend, as too low.
Collectively, their investment in Prime gave them a 26.16 per cent blocking stake against Seven’s bid, which needed 75 per cent Prime shareholder approval to get over the line.
Numbers released by Prime to the ASX showed 53.53 per cent voted against the offer.
Some 46.5 per cent of proxies voted in favour of the tie-up.
Mr Hartigan has been replaced by Peter Macourt as interim chairman until a permanent successor is found.
Macourt, a former chief operating officer of News Limited, has been a Prime board director since 2014.
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