Morningstar director Brian Han suggests that Seven West Media’s proposed merger with Southern Cross Austereo could offer its shareholders a catalyst to unlock value. The $420 million merger would see Kerry Stokes step down as chairman of Seven West after nearly 20 years. The new national media entity would combine the Seven Network and The West Australian with Southern Cross’ Triple M and Hit radio networks, along with their streaming service Listnr.
Seven West Media is an Australian media company with a presence in broadcast television, newspapers, and digital platforms. Southern Cross Austereo, on the other hand, operates radio networks and streaming services. Han stated that aggressive cost-cutting measures, digital streaming monetisation improvements, and balance sheet deleveraging have failed to revive Seven’s stock price, making this merger potentially vital.
However, Han also noted that the deal provides no premium for Seven shareholders, with the merger priced at 13¢ per Seven share, 7 per cent below Seven’s pre-announcement closing price. He added that even at Morningstar’s 90¢ fair value estimate for Southern Cross, the implied offer price is just 14¢.
Without a cash component, Seven shareholders will remain tied to the performance of the merged entity. Han acknowledged the theoretical benefits of the merger, such as cross-media synergies, scale, and cost reductions, but cautioned that these benefits have historically been elusive or overshadowed by structural issues.
