In a shock move, the Seven Network has announced a merger with heavy equipment group WesTrac Holdings, creating a consolidated holding company that hopes to cushion the Seven Network from continued trouble with advertiser revenues due to the GFC.
Mr Stokes believed the transaction will transform Seven and improve returns for shareholders and tackle the thorny issue of Seven’s share price. With shares last trading at $7.36 on Friday
“We’ve been unhappy with the discount that Seven has been trading at for some time now,” he said.
“The independent directors believe that the merger will alleviate market concerns related to re-investment risks, and will reduce or eliminate the value discount currently applied to Seven’s share price,” Seven said in a statement.
Earlier, Seven Network posted a big rise in first-half net profit today, boosted by significant items totaling $468.3 million. Net profit for the half rose to $509.1m from $20m the prior year.
The WesTrac group is the sole authorised Caterpillar dealer in Western Australia, New South Wales, the ACT and north-western China.
The proposed transaction represents a transformational opportunity for Seven and substantially repositions the company to be a leading Australian diversified operating and investment group,” Said Seven Network deputy chairman and independent director Peter Richie.
The deal is certainly an unexpected one, but comes about after Seven Network underwent an exhaustive process to examine further investment opportunities in the media sector, only to find none. But with net cash reserves of $1.04bn at the end of December the Seven Network needs to put this surplus capital to work in a growing sector, and WesTrac a key player in Australia’s mining boom is a smart, albeit unexpected choice.
