West Australian Newspapers is to buy Seven Media Group, owner of assets including Seven Network and local editions of magazines including Marie Claire and New Idea, in a A$4.1bn (£2.55bn) deal that creates the country's biggest media company.
The deal has been led by Kerry Stokes, the billionaire chairman of WAN, whose Seven Group Holdings currently holds a 24.3% stake in Seven Media Group. Private equity firm Kohlberg Kravis Roberts also owns a significant stake in SMG.
Seven West Media, the new combined group, owns assets including more than 20 newspapers, a third of Sky News in Australia, 25 magazines and 50% of online portal Yahoo!7.
"This transaction will transform WAN into the largest listed Australia-domiciled media company," said Stokes. Following the deal SGH will hold 29.6% in the combined company. KKR will hold a 12.6% stake.
As part of the deal WAN will raise about A$1bn by selling new shares to Seven Group and repay a loan owed to the company by Seven Media worth A$650m, and a further A$250m selling convertible preference shares to Seven Group. The combined company will have new debt of A$2.1bn.
Doug Flynn, representing WAN's independent directors, said the deal was "transformational" and allowed the group to move from an "attractive niche" reliant on newspapers and media holdings in Western Australia to a "diverse and integrated national media business in one step".
"[WAN] must look to the future," he said. "Acquiring SMG exposes us to free-to-air television, digital multichannel growth and a direct interest in the Yahoo!7 joint venture."
Media consolidation has been gathering pace in Australia since James Packer, the billionaire who sold TV Network Nine Entertainment to CVC, and Lachlan Murdoch acquired minority holdings and seats on the board at Ten Network. CVC is reportedly planning an A$5bn float of Nine Network later this year.
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