Seven West Media Ltd (ASX: SWM) shares are up 15% at the time of writing, as its sale of Pacific Magazines to Bauer Media looks set to proceed. The Australian Competition and Consumer Commission (ACCC) has decided not to oppose the sale.
ACCC decision
The ACCC commenced its review of the transaction in October and raised concerns about it in December. Ultimately, however, the ACCC decided the transaction was not likely to substantially lessen competition in relevant markets. Pacific Magazines and Bauer Media publish overlapping print and digital magazines and content published on digital platforms. Bauer's Woman's Day and Take 5 compete with Pacific Magazines' New Idea and That's Life!.
Nonetheless, the ACCC declined to oppose the deal, saying that although there was a notable level of competition between the print titles, the deal was unlikely to substantially lessen competition because publishers of other media will increasingly compete.
The ACCC also noted that content offered by the four key magazine titles, including celebrity news, 'real life' stories, puzzles, and food, health and lifestyle tips, was offered from other sources.
The ACCC found that while many of Bauer and Pacific Magazines' customers valued the tactile nature of physical magazines, they were often not regular buyers of the magazines. Others increasingly see online content as a ready alternative which should constrain Bauer's ability to raise prices or reduce investment in content.
ACCC Chair Rod Sims said, "the significant declines in circulation and revenue experienced by many magazines are sustained, substantial, and likely to continue. We note that some magazine titles have already closed, and others are likely to follow, regardless of this deal."
Seven West Media welcomes news
Seven West Media welcomed the news. The company is set to receive $40 million in cash consideration plus $6.6 million in advertising from Bauer over 3 years. Completion of the sale is expected to occur on 9 April 2020.
Seven West Media's CEO James Warburton said:
We welcome today's regulatory approval on the sale of Pacific Magazines to Bauer Media. Pacific Magazines has always been an important part of Seven West Media and will leave a lasting legacy. These efforts mean that Pacific's assets will have a bright future as part of a larger group with Bauer, and SWM will maintain a relationship through the successful television show Better Homes and Gardens.
