Australian billionaire Kerry Stokes will raise A$3.2 billion (US$2.5 billion) for media takeovers by moving Seven Network Ltd's television and magazine assets into a venture with Kohlberg Kravis Roberts & Co. Seven's shares had their biggest gain in eight years.
A venture owned equally by Seven and New York-based KKR will acquire Stokes' magazine unit and Channel Seven, the nation's second-biggest TV network, the Sydney-based company said in a statement today. The transaction mirrors one struck by James Packer, Australia's richest man, who sold half his Nine Network in a A$4.5 billion deal with buyout firm CVC Asia Pacific Ltd.
Stokes, Packer and Rupert Murdoch's News Corp have led US$6.7 billion in media investments in five weeks since parliament said it would allow broadcasters and publishers to buy each other and foreigners to make media takeovers in Australia. Buyout firms such as KKR, which was rebuffed in an A$18.2 billion bid for Australian retailer Coles Myer Ltd, are attracted to an economy in its 15th year of growth.
``The deal gives Seven greater firepower to participate in the consolidation of the media sector,'' said Atul Lele, who helps manage the equivalent of US$308 million at White Funds Management, including more than A$6 million worth of Seven shares.
``It's extremely positive. Seven has a clear interest to be a major player.'' Stokes, who owns 42 percent of Seven, will probably target newspapers after taking a stake in West Australian Newspapers Ltd, publisher of Perth's only daily, Lele said.
Buyout offers for Australian companies have surged to US$27.3 billion this year, from US$1.4 billion last year, according to data compiled by Bloomberg.
KKR completed the biggest buyout in the nation this year, acquiring Brambles Industries Ltd.'s trash collecting and industrial services unit for US$1.4 billion. It missed out on Publishing & Broadcasting's deal last month.
``We're investing in this business because this in our mind is Australia's best-performing media business,'' Justin Reizes, a director of KKR, said. The firm holds its investments on average for 7.5 years, he said.
Alex Pollak, a media analyst at Macquarie Bank Ltd. in Sydney, said Seven may target John Fairfax Holdings Ltd, publisher of the Sydney Morning Herald.
Stokes, who didn't exclude making a bid for Fairfax, said he'll primarily look at expanding his television, magazines and online businesses.
Seven bid for Federal Publishing Co's stable of 25 magazines this month, missing out to News Corp, which offered about A$175 million.
Australia's parliament on Oct. 18 voted to scrap most media ownership restrictions next year, ending a 19-year ban on foreign and cross-media takeovers.
Shares of media companies have gained this year on speculation the changes would set off a wave of takeovers, with the nation's S&P/ASX 200 Media Index rising 24 percent, beating the wider S&P/ASX 200 Index's 12 percent gain.