Seven West (ASX:SWM) share price lifts 10% amid Prime Media acquisition

Seven West expands its Australian media presence with today’s acquisition…

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The Seven West Media Ltd (ASX: SWM) share price is climbing higher on Monday after announcing the acquisition of Prime Media Group Limited (ASX: PRT).

At the time of writing, shares in the media company are swapping hands for 50 cents apiece, up 9.9%. As a result, the company’s share price is now 18.6% away from its 52-week high.

Let’s take a look at the latest price moving announcement.

What’s moving the Seven West Media share price today?

Investors are getting excited about Seven West Media on Monday as the company looks set to expand its media presence through an acquisition. The entity being acquired is the Australian-based and fellow ASX-listed media corporation, Prime Media Group.

According to the release, Seven West is acquiring Prime Television, Seven Affiliate Sales, and all its subsidiaries. At present, Prime operates the regional television network Prime7 in eastern Australia and GWN7 in regional Western Australia.

In turn, Seven West believes the acquisition will create a broadcasting, video, and news powerhouse — reaching more than 90% of the Australian population every month.

Furthermore, the bid for Prime Media’s business values it at $131.9 million. Based on the current number of shares on issue, this equates to 36 cents a share. Meanwhile, Prime Media was going for 23 cents per share at the end of Friday.

Unsurprisingly, shares in Prime Media have skyrocketed today on the significantly higher offering. At the time of writing, they are trading 69.57% higher at 39 cents a share.

Seven West shareholders will likely be distributed cash on the balance sheet of the acquired companies. Moreover, this spare cash is expected to be in the realm of $10 million from Prime and its various subsidiaries.

Additionally, accounting for the cash and share of distributions, Seven Media’s net investment is expected to be roughly $72 million. This would suggest a payment 2.9 times enterprise value to FY21 earnings before interest, tax, depreciation, and amortisation (EBITDA) for the acquisition.

Management commentary

Commenting on the acquisition, Seven West Media CEO James Warburton stated:

This proposal is an important step forward for both companies. SWM and PRT are great partners and have a long, successful relationship. Together, they will offer the best content for our national audience and unmatchable premium revenue opportunities for our clients.

The proposed transaction is an exciting and transformative development for advertisers and media buyers. It means we will be able to give advertisers easy and seamless access via a single platform to capital city and regional markets.

The market is showing enthusiasm for the Seven West Media share price with cost synergies expected. In fact, an estimated $5 million to $10 million cost synergies are anticipated on an annualised basis. These are forecast to be realised within 12 to 18 months from the acquisition completion.

Finally, the Seven West Media share price is up 196% in the last year.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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