Seven West Media has agreed to merge with Southern Cross Austereo, which own the Triple M Network as well as the streaming and podcast production platform LiSTNR (which hosts the likes of Hamish and Andy, Abbie Chatfield’s It’s a Lot, and The Briefing).
The deal, which according to an investor pack would result in a combined group with a market capitalisation of $417 million, caught many a media reporter somewhat by surprise, with Nine Entertainment having been considered a serious suitor for SCA.
In order to do so, Nine would have to complete the sale of its radio assets, which have been on the chopping block for a significant period of time. In any case, Calum Jaspan at The Age and Sydney Morning Herald (mastheads owned by Nine Entertainment) reported over the weekend that the deal with Seven is non-binding as it stands, leaving the possibility of rival offers.
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The deal functions as a lifeline for a sinking Seven — and one that might not even be all that useful. Seven West Media’s finances are, as Crikey has reported previously, categorically dire. More than a quarter of the company’s entire operating expenses are spent on an AFL rights deal to which it contributes $170 million a year, and to which it is locked into until 2031, despite having not seen an improved EBITDA (earnings before interest, taxes, depreciation, and amortisation) position since 2021.
Conversations with industry insiders as well as high-level sources with knowledge of Seven’s finances earlier this year suggested there was a possibility Seven West would not financially survive the length of its own football rights deal, but relied on it for its audience in a similar conundrum to Network 10 in the 2000s.
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“For Seven, the only thing worse than winning [the football rights] is losing them,” media writer Tim Burrowes told Crikey in July.
Seven’s finances were described by a former executive as a “house of cards” of debt and revenue this week. The idea of a private equity buyout has been raised by industry sources speaking to Crikey, with the acknowledgement that long-term chair and media don Kerry Stokes would be too proud to consider such an option, not to say anything of Seven’s attractiveness (or the lack thereof) for a potential buyer. Seven’s share price at the time of writing sits at 14 cents, down 72% on where it was in 2022 when the company announced the extension to its current AFL rights deal, and a long way from the $15 it traded at in 2007. In lieu of pie-in-the-sky solutions like a buyout, the merger with SCA serves as an unusual option for a life raft.
SCA’s most recent annual report paints a picture of a company where EBITDA was down 24.3% on the previous year, with revenue down marginally as well. In February, SCA slashed 8% of its workforce in a raft of job cuts, and the annual report speaks to “further meaningful and permanent cost reductions for FY25”. The investor pack on the merger proposal spoke to $25-30 million in “cost synergies”, but Seven didn’t respond to questions put last week as to whether those would involve further job cuts or redundancies, or which areas of the business those synergies would be drawn from.
In any case, any profits that could be eked out of a slimmed-down SCA post-merger would be relative small change for a business the size of Seven. While SCA had $499.4 million in revenue in FY24, Seven West had $1.41 billion. In the same financial year SCA had an EBITDA of $55.5 million, which would represent just under a third of Seven West’s. Both are exposed significantly by the advertising market downturn that has seen Seven’s earnings tank. Neither Seven nor SCA have significant subscription media products that insulate them from the shifting winds of adland, unlike their competitors Nine and News Corp, although SCA’s podcast assets may be a step in the right direction owing to the particularly targeted nature of podcast and audio advertising. In any case, these are two very different companies in terms of scale.
Which is perhaps why Stokes and co felt empowered to come in over the top of SCA shareholders and dilute them to 49.9%, in a move eviscerated by Joe Aston in the Financial Review over the weekend as a cynical one that resembled “watching a pair of spotted hyenas casing a snuggle of tree sloths”.
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Aston describes the merger ratio as “nakedly contrived for the sole purpose of depriving Southern Cross shareholders of a vote” on the merger, which will give the Stokes family a 20% share in the merged entity. Seven Group Holdings will hold another 40%. Despite that control from the Seven side of the deal, Southern Cross shareholders assume Seven West’s $290 million in net debt, and don’t get a say in whether the merger goes ahead.
And as for the new board? Stokes’ son Ryan will remain on the board after the scheduled departure of his father in February 2026, and seemingly with a view to dispelling a perception that he cares less about the media side of the family business (which is far less profitable than the rest of the Seven Group), interviewed with the family’s The West Australian newspaper over the weekend to say the media side of the business was a “key part of [his] life”.
In doing so, Stokes spoke of the importance of “accountability that comes with being an editor or publisher”, speaking of a world that “isn’t framed by honest and accountable reporting”, but instead “audience manipulation”. Of course, as Crikey has previously reported, Seven has its own mechanisms for accountability, rather than choosing to submit to the judgment of its peers: Seven eschews membership of the Press Council in favour of its own “Independent Media Council”, conveniently made up of 29 member publications all owned by Seven West Media. Nowhere to go then, if you have an issue with bastions of responsible reporting like Seven’s new PDF newspaper The Nightly invoking the gates of Auschwitz on the front page over an unremarkable draft UN resolution decision.
