help kerry! we need saving!, page-28

November 28, 2012, 6:24 PM
Seven West Buyout May Prove Tempting for Stokes
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By Ross Kelly
The media and heavy machinery businesses may seem like chalk and cheese to most investors.

Not so in the Australian mining hub of Western Australia state where billionaire Kerry Stokes has an opportunity to further consolidate his interests in both sectors through a possible 1.3 billion Australian dollar (US$1.4 billion) deal.

Credit Suisse Analyst Samantha Carleton says Seven West Media SWM.AU -1.82%–which owns the popular Seven free-to-air television network and the West Australian newspaper–has become an easier takeover target since a shock profit downgrade in April hammered its share price.

The company’s largest shareholder with a 34% stake Seven Group Holdings SVW.AU +0.55%, also happens to be flush with cash after selling its holding in cable-TV company Consolidated Media into a takeover bid by News Corp NWSA -0.83%., owner of The Wall Street Journal.

Seven Group is controlled by Mr. Stokes. Apart from the Seven West Media stake, it also houses the WestTrac heavy machinery business, which has the distribution rights for Caterpillar equipment in parts of Australia and China.

A A$1.3 billion offer for the remaining Seven West Media shares, which would value the entire business at A$2 billion appears feasible, Ms. Carleton says.

This would equate to A$2.00 per Seven West Media share and represents 7.5 times the company fiscal 2012 earnings before interest, tax, depreciation and amortization.

Shares in the company closed 1.8% lower Wednesday at A$1.615.

However, it could be hard for investors to swallow a takeover offer at A$2.00 a share, given they were trading above A$3.50 before the profit downgrade in April and a subsequent capital raising in August that diluted the value of existing shareholdings.

With 34% of the register, Mr. Stokes is well-placed to clear a path through.

http://blogs.wsj.com/dealjournalaustralia/2012/11/28/seven-west-buyout-may-prove-tempting-for-stokes/