Seven West Media announces merger with Prime Media Group

The Seven West Media Ltd (ASX:SWM) share price will be on watch after announcing a merger with Prime Media Group Limited (ASX:PRT)…

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The Seven West Media Ltd (ASX: SWM) share price will be on watch on Friday after its announced two transformational strategic initiatives.

What did Seven West Media announce?

According to the release, the media company believes these initiatives will transform Seven West Media and position the network as the leading wholly-owned commercial premium broadcast, video and news network across Australia, reaching over 18 million people each month.

These initiatives include a merger with Prime Media Group Limited (ASX: PRT) and the divestment of its Redwave business to Southern Cross Media Group Ltd (ASX: SXL).

In respect to the merger, Seven West Media will acquire all of Prime Media's issued shares through a Scheme of Arrangement. This scheme will see Prime shareholders receive 0.4582 Seven West Media shares for each Prime share that they hold.

Management believes the merger will deliver significant value creation. This is by providing advertisers with a single platform that will deliver superior audience reach across metropolitan and regional markets.

It also expects it to unlock the revenue potential of regional audiences, enhance the audience proposition, and generate expected cost synergies of $11 million on an annualised basis and potential revenue upside. These costs savings are expected to be fully realised within 12-18 months from completion.

Divestment.

Seven West Media and Southern Cross Media have agreed a cash consideration of $28 million for the Redwave business. This represents an FY 2019 Enterprise Value/EBITDA multiple of 8x.

Seven West Media's chairman, Kerry Stokes AC, said: "SWM and Prime have had a longstanding relationship and are key partners in the industry. The combined group will cement our position as Australia's leading content provider and presents excellent value to shareholders."

Prime Media's chairman, John Hartigan, has recommended the transaction.

He commented: "The Prime Board has carefully considered the Proposed Transaction and believes it is in the best interests of Prime shareholders. It represents an exciting opportunity for Prime shareholders to maintain their exposure to the broadcast television industry in a stronger and larger combined group that is more relevant and resilient."

The merger remains subject to an independent expert's report, and shareholder, court, and regulatory approval. All being well, management is aiming to complete the deal early next year.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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