KKR-backed Seven Media bought for $4.2b
KKR-backed Australian media major Seven Media Group has been bought by West Australian Newspapers Holdings (WAN) for A$4.1 billion ($4.2 billion) in cash, shares and an assumption of debt. The deal sees the return of double-digit valuations, this one at around 11x EBITDA based on fiscal year-end 2010 results, and an estimated 10x based on half-year December 2010 results. More relevant to WAN is the fact that the transaction creates the largest diversified media entity in the country.
As part of the transaction, WAN will be renamed Seven West Media and the merged entity will be led by CEO of Seven Media David Leckie. According to a statement from the companies, Seven Media Group's parent, Seven Group Holdings, will hold a 29.6% stake in the merged entity. West Australian will issue A$1.08 billion ($1.09 billion) of stock, A$250 million ($253 million) of convertible preferred stock and repay A$650 million ($658 million) of Seven Group Holdings Ltd.'s debt owed to Seven Group Holdings. The deal is subject to approval by WAN shareholders, with the vote scheduled for April 11.
A Seven Group spokesman confirmed that KKR currently has a 47% stake in Seven Media Group, which will translate into 12.6% of the combined group following the deal's completion. Seven Group Holdings currently holds 47% of Seven Media, and the remaining 6% is owned by a combination of management and mezzanine debt providers.
Pending approval, Seven West Media's media entities will include The West Australian, Seven Network, Pacific Magazines and Yahoo Seven, as well as a one-third stake in Sky News. West Australian plans to add TV stations across Australia's five largest cities and the country's second-most visited Internet portal in its purchase of Seven Media.
According to a recent PricewaterhouseCoopers "Entertainment & Media Outlook 2010-2014, the outlook for Australian media remains cautiously positive. "As the entertainment industry recovers from the economic downturn of 2009, we see a continuation of themes which emerged last year. Namely, the resilience of consumer spending on entertainment and media products and services during a recession and the structural resizing of the overall advertising market wrought by the internet as consumers and advertisers migrate online."
Morgan Stanley acted as co-senior debt arrangers and financial adviser on the deal for Seven, with Freehills as legal advisor and Ernst & Young as a strategic adviser. O'Sullivan Pullini was the exclusive financial adviser to KKR, with joint legal adviser Baker & McKenzie and Simpson Thacher & Bartlett LLP. Deloitte worked on behalf of the private equity firm as well.
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