With credit markets still tight and access to finance limited, the new structure(SGH) has been promoted on the basis of improving EPS and positioning the group to higher growth businesses for stakeholders.
But at the end of the day its really all about imho free access to the cash sitting within SEV.
What a deal ! KS maintains control and finally grabs the cash thats long been sitting within SEV 'which will be deployed' to other areas offering growth.
Now we know how the bullet repayment due(in part)2013 will be met.
By a staff reporter, with AAP
Seven Network Ltd says it plans to merge with Kerry Stokes' heavy machinery group, WesTrac Holdings Pty Ltd, in a scrip-for-scrip deal which will consolidate the media mogul's assets under one company.
The new entity, to be called Seven Group Holdings Ltd, will be listed on the Australian Securities Exchange (ASX) and will appoint Peter Gammell as its chief executive officer.
Mr Gammell is a director of Seven and managing director of Mr Stokes' private vehicle, Australian Capital Equity Pty Ltd (ACE), which holds 100 per cent of Caterpillar-dealer WesTrac.
Under the proposal, which has been unanimously approved by Seven's independent directors, ACE directors will receive 115 million shares in Seven Group, implying an equivalent value of $8.70 per Seven Network share.
This represents an 18 per cent premium to Seven's current share price of $7.36, and represents a 33 per cent premium to the company's 90-day volume weighted average price.
Following the transaction, ACE and its director-related entities which already hold 48 per cent of the Seven Network will own about 68 per cent of Seven Group.
Seven Network shareholders will receive one share in the new Seven Group entity for each share held, with the company forecasting a 20 per cent boost in earnings per share in fiscal 2011 as a result of the deal.
On a pro-forma basis, Seven Group Holdings will have about 305 million shares outstanding.
Seven said the parties had agreed WesTrac to have an enterprise value of $2 billion, comprising equity value of $1 billion and assumed net debt of $1 billion.
Provided the transaction proceeds, the new Seven Group board will be comprised of the existing Seven Network board, with the addition of WesTrac chief executive Jim Walker and two additional independent directors.
The latter are expected to be nominated at Seven Group's first annual general meeting in late 2010.
Shares in Seven fell during the morning session, dropping 1.9 per cent to $7.22 by 1215 AEDT, having traded as low as $7.16, against a 1.65 per cent rise in the benchmark index.
Stokes says deal will 'transform' Seven
Speaking to journalists after the announcement was made, Seven executive chairman Kerry Stokes said the transaction would transform the company and improve returns for shareholders, while tackling the thorny issue of Seven's share price.
"We've been unhappy with the discount that Seven has been trading at for some time now," Mr Stokes told the media briefing.
Mr Gammell said the transaction was a "low risk" for Seven.
"We believe this (the transaction) will result in a positive re-rating over time," he told journalists.
In a statement to the Australian Securities Exchange (ASX), Seven said its directors had held a comprehensive review of potential media and telecommunications opportunities, and concluded that the "value-enhancing" options were limited.
"The independent directors believe that the merger will alleviate market concerns relating to re-investment risks, and will reduce or eliminate the value discount currently applied to Seven's share price," the company said.
Mr Stokes said both the television network and WesTrac were performing strongly and had terrific opportunities for growth.
"Since the deal to create [Seven Media Group], Seven has evolved into an investment holding company with strong media platforms and the financial capacity to expand into new sectors," Mr Stokes said.
"We are excited about the potential opportunity this transaction has to transform Seven, and about the growth opportunity for all Seven shareholders."
Independent expert Deloitte has concluded the Seven share scheme is fair and reasonable and in the best interests of Seven shareholders.
If approved, Seven Group Holdings will be made up of 100 per cent of WesTrac, 47 per cent of Seven Media Group the media joint venture of KKR, Seven Network, Pacific Magazines and Yahoo!7 and 23 per cent of West Australian Newspaper Holdings Ltd.
It will also hold 22 per cent of James Packer's Consolidated Media Holdings Ltd which also holds 25 per cent of pay TV operator Foxtel and 66 per cent of National Hire Ltd, as well as cash and other existing smaller Seven investments.
Seven Group will acquire the stake in National Hire Ltd, which owns 46 per cent of equipment hire business, Coates Hire, for $246 million.
Scheme of arrangement meetings for Seven Network shareholders are expected to be held in mid April, with ACE and its director-related entities to vote as a separate class of shareholders under the scheme vote.
JP Morgan and Grant Samuel advised Seven, while Goldman Sachs JBWere advised ACE
SEV Price at posting:
$7.00 Sentiment: None Disclosure: Not Held
