merger

Media is an inevitable part of journalism and in today’s world, media is considered the most powerful among all. Seven West Media (ASX: SWM) is one of Australia's most prominent media companies, with a market-leading presence in content production across broadcast television, publishing, and digital. Seven West Media is Australia’s leading multiple platform media company with a market-leading presence in broadcast television, magazine and newspaper publishing, and online (Anon.)

Seven West Media merger with Prime Media

On 18 October 2019, Seven West Media announced its merger with prime media and divestment of WA radio assets. This acquisition would be through a 100% scrip- based prime scheme arrangement. Where Seven West Media would acquire all shares of Prime, with Prime shareholders receiving 0.4582 Seven West Media shares for each Prime share they held

Before the merger process, any firm has to go through various research and analysis.

Industry analysis is external analysis, and it is considered valuable as it is important while making efficient and effective decisions regarding entrance, withdrawal, growth, placement of products, and cost-saving of products and services produced. It focuses on those factors which derive the competitiveness and sustainability of the business in the long run.

A business environment is affected by external factors like political changes, social factors, technologies, economical changes. The media industry is affected similarly and mostly affected by the technological factor.

A known fact that technology has overcome almost everything and the media industry has not remained untouched by it. From newspaper production to e-journals and e-news the media industry has evolved a lot. Business practices need to be modified by offering the newest advanced services. The media industry should consider meeting customer needs and expectations in every possible way. In this advanced technological era, the media industry requires to cope up with the customer expectation by providing news and entertainment through every social media platform (Mason, 2018).

In this merger, Seven West Media will acquire Prime’s shares through a Scheme of Arrangement where the Prime shareholders will be getting 0.4582 shares of Seven West Media for each of Prime share and Seven West Media shareholders will be owning 90% of the combined entity and 10% remaining holds to Prime Shareholders.

Prime Media Group’s had total revenue of $240.1 Million in 2017, and in 2018, it was $291.2 Million. The financial performance maintained the revenue shares of 53.2 audience share and 66.8 agency revenue shares. In 2019, the total revenue of Prime Media Group was $191.9 Million. (Prime Media Group, 2019)

In 2017, Seven West Media had a net profit after tax of $166.8 Million which reached $142.5 Million in 2018. Likewise, the financial performance of 2019 showed an underlying net profit after tax of $129.3 Million. (Seven West Media, 2019)

The main strategy for this merger can be described as a way to create a leading national reach and audience proposition. This will provide its advertisers with seamless access to the metro and regional Australia. Its potential will reach over 90% of Australia’s population each month. There will be a seamless single platform to access metro and regional markets. This will enhance the audience proposition through content and digital delivery. This merger is expected to be EPS accretive on a pro forma basis following the realization of expected cost synergies. 

During the M & A deal, both companies involved will have a different value of the target company. The buyer will have the lowest price whereas, the seller will try to place the highest price.

The value of a firm after merger increases as it combines with the other separate firms and this effect is called synergy. These synergies also increase for reasons like cost savings due to operational efficiencies as there is the more productive use of assets expected. Following may be potential sources to provide synergistic benefits:

In the case of this merger, the cost synergies of $11m are expected on an annualized basis and it is also expected to be fully realized within 12-18 months from completion. After a merger, the related fixed assets and overhead are eliminated which tends to give a larger benefit.

In this merger, Seven West Media has acquired Prime Media Group through SWM with a stake of 14.9%. It ensures to provide stability in business and support Australian regional news side by side. The merger process also ensures the growth of two products at the same time. It can create more value in the merged firm where the previously inaccessible customer can be accessed by creating new potential for new products.

It can be the main source of cost synergy, the merger of Seven West Media and Prime Media Group which could mark Australia’s commercial premium broadcast as wholly-owned which would the worth value of $65 Million buys has fallen in the shares of Seven West.

The merger of Seven West Media and Prime Media Group has given rise to significant value creation through various schemes. It will be providing advertisers with a single platform delivering superior audience reach across metropolitan and regional markets. It will unlock the revenue potential of regional audiences. Also, it will enhance the audience proposition through re-investment in content and expanding the digital delivery of SWM’s offering in regional markets.

Return on Assets and Return on Equity Seven West Media

Return on Assets and Return on Equity Prime Media Group

References Hayes, A., 2020. Investopedia. [Online] Available at: https://www.investopedia.com/terms/m/mergersandacquisitions.asp [Accessed 26 12 2020]. Kelly, V., 2019. Mumbrella.com. [Online] Available at: https://mumbrella.com.au/seven-west-media-and-prime-to-merge-602926 [Accessed 26 12 2020]. Media, S. W., n.d. Seven West Media. [Online] Available at: www.sevenwestmedia.com.au [Accessed 21 12 2020]. Robert F. Bruner, J. R. P., 2004. Applied Mergers and acquisitions. s.l.:John Wiley & Sons. Schoenberg, S. C. R., 2006. Thirty Years of Mergers and Acquisitions Research: Recent Advances and Future Opportunities. s.l.:British Journal of Management. Announcements (asx.com.au)

Content Creation

Packaging

Distribution

User interface

End User

Sales and Net Profit Margin

Sales 06/15 06/16 06/17 06/18 06/19 1971055000 1872818000 1840818000 1737591000 1738354000 Net Profit Margin(%) 06/15 06/16 06/17 06/18 06/19 12.02 12.48 10.18 9.01 9.5500000000000007

ROA & ROE %

Return on Assets (ROA %) 2015 2016 2017 2018 2019 9.75 8.8699999999999992 10.77 8.93 12.64 Return on Equity (ROE %) 2015 2016 2017 2018 2019 17.5 16.55 39.65 27.08 141.72

Sales & Net Profit Margin

Sales 2015 2016 2017 2018 2019 285877000 264190000 265799000 241908000 212072000 Net Profit Margin(%) 2015 2016 2017 2018 2019 14.1 11.63 15.04 11.59 8.98

Prime Media Group ROE & ROA

ROE % FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 20.53 43.95 53.13 52.46 31.24 ROA % FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 12.87 17.39 24.1 26.2 20.77