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M&A and Deals 16/05/2018

By: Tony Xie

Channel 7

In recent times, Australian television channels have looked for ways to ensure their sustainability, following the onset of other forms of entertainment such as Netflix and YouTube. Speaking at the Macquarie Connections Australian Conference on May 3rd, Ryan Stokes, Chief Executive of Seven Group Holdings, discussed various potential strategies that will create values for shareholders, including plans to consolidate Seven West’s assets in a manner which will drive “value for shareholders”. Appointed in 2015 as CEO, Mr Stokes explained there was inherent “logic” in bringing the group’s newspaper and TV together, as the decision will not only reduce operating costs, but also increase synergies, given a large operating scale and a wider range of audience. He explicitly highlighted the benefit of having “audience across multiple platforms” and was confident that Seven can “leverage” this advantage to fundamentally drive up value for shareholders. He cited the success story of Seven Perth and claims that integrated offices with both newspaper and TV departments will create “more opportunities” down the road.

Utilising economies of scale has not been the only strategy to improve Seven’s standing with shareholders. Following the relaxation of legislation within the media industry last September, analyst have forecasted the potential merger of Seven West Media and Nine Entertainment, along with Fairfax media. Hitherto, there has been no official announcements by any parties involved, but if undergone, this deal will ensure the integration of essentially all media services, from print papers to primetime TV. Whilst this certainly is an option for Mr Stokes’ to consider, the abolition of the “reach rule”, which prevented a TV network from broadcasting to 75% of the population and also restricted the amount of media-related assets firms could hold, has also meant that Seven can look to further opportunities to expand itself, rather than merge with other Australian companies.  Mr Stokes’ further touched upon Seven’s investment portfolio (worth $436 million at the end of last year) and said that the company may divest and potentially funnel those funds into other assets.

oOh! Media

A strong leader, one who is always seeking strategic acquisition opportunities, chief executive of oOh! Media, Brendan Cook, has led oOh! to unprecedented growth, recording a five-fold profit growth within the last decade. Cook has no intentions of stopping here; also present at the Macquarie Australian conference, Mr Cook espoused the importance of remaining on the acquisition trail, describing it as an inevitable aspect of “normal business life”. Despite the deal falling through with Here, There & Everywhere (HT&E), another publicly listed Australian media company, the CEO and founder has remained optimistic of future opportunities, claiming that oOh! will “talk to anyone that wants to talk to [them]”.

On the topic of potential targets, Mr Cook was questioned about metropolitan radio assets, including KIIS FM, the flagship radio asset of HT&E; despite acknowledging the existence of natural synergies, he claimed that potential boosts in revenue does not unequivocally categorise a merger as attractive.

Sources: AFR, Sydney Morning Herald, The Age

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