Australian media and investment company Seven Network yesterday announced a surprise merger with a heavy equipment firm, saying the unusual match-up was designed to take advantage of the mining boom.
In announcing the proposed tie-up with WesTrac, Seven Network chairman Kerry Stokes said Australia’s resources industry was set to be more profitable than television and newspaper operations.
“WesTrac will produce more cash than the media group, yes,” Stokes told reporters.
PHOTO: BLOOMBERG
WesTrac, which is controlled by billionaire Stokes, provides trucks, other vehicles and equipment used in construction and mining and has a presence in the resource-rich state of Western Australia, as well as an office in China.
Seven holds one of Australia’s major free-to-air television stations and also has stakes in pay television, magazine, Internet and newspaper publishing companies.
“Seven and WesTrac Group are two great companies,” Stokes said in a statement. “Both are performing strongly and both have terrific opportunities for growth.”
The proposed merger, which will require Seven shareholder approval, would be an all-share deal and would create a new entity to be called Seven Group Holdings in which Stokes would hold a 68 percent stake.
“Today is an exciting day in Seven’s evolution,” deputy chairman and independent director Peter Ritchie said. “The proposed transaction represents a transformational opportunity for Seven and substantially repositions the company to be a leading Australian diversified operating and investment group.”
The announcement came as the Seven Network posted a first-half net profit of A$509.1 million (US$459 million).
Investors did not initially welcome the news with shares in Seven dropping 5.16 percent to A$6.98 by market close.
In other media news, the country’s second-largest newspaper publisher Fairfax Media, which publishes the Age and the Sydney Morning Herald, announced a better-than-expected first-half net profit of A$148.8 million after it cut staff and reduced debt.
Revenue for the last six months of last year, however, fell 13 percent to A$1.26 billion from a year earlier, with the drop in revenue blamed in part on the global financial crisis.
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