Seven West Media Ltd (ASX: SWM) has announced a takeover this morning, does this make its share price a buy?
Seven West Media is one of Australia’s prominent media companies. It is well-known for its television channels which include Seven, 7TWO and 7MATE, among others. It also has a presence in magazines and news with The Sunday Times, Better Homes and Gardens and New Idea being only just a few of its written media offerings.
What Has Seven West Acquired?
Seven West is buying Prime Media Group Limited (ASX: PRT), which broadcasts TV in regional areas in northern and southern NSW, the ACT, Victoria, the Gold Coast area of south east Queensland and all of regional Western Australia.
It broadcasts Nine Entertainment Co Holdings Ltd (ASX: NEC) programming in Mildura and Western Australia in a joint venture with WIN Television and it also owns and operates the datacasting television service iShopTV. It also has an affiliation agreement with the Seven Network
Seven West Media is buying Prime through an all-share transaction. Prime shareholders will receive 0.4582 shares for each Prime share. If the merger receives all the required approvals, Prime shareholders will own 10% of the combined entity.
The merger will mean the new business can reach more than 90% of all Australians.
Seven West pointed to the fact that over a third of Australians live in regional areas with higher discretionary income (because of lower housing costs) as a reason that it would be attractive for growth in advertising dollars of the business.
Seven West said that it expects to save around $11 million of annualised costs within a year to 18 months. Less property needs, removal of duplicated costs, economies of scale and removal of ASX costs were some of the potential savings.
It has already been unanimously approved by the Prime Board, so it seems like it will go ahead as long as the regulators approve it. It’s expected to complete by early January 2020.
But traditional media is a difficult industry to do well in, more advertising revenue is heading to digital advertisers these days. For solid returns I’d rather buy the shares in the free report below.
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