Seven West Media raises $311m to fund growth

Tim Worner has heralded a new growth phase for the Seven West Media company after raising capital to bolster his balance sheet.

Chief executive Tim Worner says the capital raising will put Seven in a better position to secure top-tier sports. Picture: Britta Campion

Seven West Media chief executive Tim Worner has heralded a new growth phase for the media company after raising capital to bolster his balance sheet.

The owner of the number one free-to-air TV network has sold new shares worth $311 million, well in excess of the underwritten amount of $150m.

The capital raising has lowered Seven’s debt to $691m or 1.6 times earnings before interest, tax, depreciation and amortisation, a moderate level of gearing given the company’s strong cash flow.

Amid a subdued outlook for the advertising market and rising programming and sports rights costs, Mr Worner said the move delivered “an important milestone in the transformation of our company”. Speaking on the sidelines of Seven’s extraordinary general meeting in Sydney, Mr Worner told The Australian: “This ­provides the business improved flexibility to pursue future growth opportunities and the next phase of our transformation.”

For Seven, the raising comes at a pivotal moment as it prepares to retain its Australian Football League TV rights, which have become even more valuable to advertisers because they guarantee a large live audience.

While Mr Worner said the raising was principally about cleaning up his balance sheet, he admitted it would enable Seven to “maintain leadership positions” by putting it in a better position to secure top-tier sports amid a battle with rival broadcasters to control the rights.

“This wasn’t about getting ourselves into a position to have a big swing,” he said. “Our capacity to bid for AFL or NRL rights is not governed by the amount of debt we have. We could have made our play without having undertaken this transaction. A happy by­product of it is that we are in a ­better position with greater flexibility and a cleaner structure.”

With Seven, like most media companies, facing low earnings growth for at least two years due to flat revenues, Mr Worner said the raising also gave him the firepower to mount corporate takeovers should the media laws change, although he cautioned that some media assets were overpriced.

“All of the things we’ve looked at were overpriced,” he said. “We haven’t gone right to that point with too many assets but the ones that we have were overpriced.

“This gives us the flexibility to look at things in a bit more depth and we’re going to do that.”

The raising also addresses the overhang of the convertible preference shares, easing another concern among investors about the company’s capital structure.

It has also increased media mogul Kerry Stokes’ stake in the company after retail investors showed lukewarm support, pushing his shareholding via media and mining conglomerate Seven Group to just under 41 per cent, up from 34 per cent.

Of the $311m raised from investors, institutional shareholders contributed $289m. Seven had set an upper limit of $611m, but demand weakened after the share price fell below the offer price of $1.25 a share.

Shares in Seven West closed down 1.59 per cent, or 2c, to $1.24 as the wider sharemarket fell lower by 1.73 per cent.