Seven Network Limited (SEV) and Australian Capital Equity Pty Ltd today announce the proposed creation of a leading Australian diversified operating and investment group through a scrip for scrip merger of Seven and WesTrac Holdings Pty Ltd . WesTrac Group is a wholly-owned subsidiary of ACE. The combined group will be called Seven Group Holdings Limited and listed on the ASX.
Seven Group Holdings will comprise wholly-owned operating businesses and key strategic investments including 100% of WesTrac Group, the sole authorised Caterpillar dealer in Western Australia, New South Wales / Australian Capital Territory and the North East region of China; 47% of Seven Media Group, a joint venture with Kohlberg Kravis Roberts comprising Australia’s leading television network, Seven Network, Pacific Magazines, one of Australia’s two largest magazine publishing companies, and Yahoo!7; 23% of West Australian Newspaper Holdings, the leading media group in Western Australia; 22% of Consolidated Media Holdings, which owns 25% of Foxtel and 50% of Premier Media Group; 66% of National Hire Limited, which in turn owns 46% of Coates Hire, the largest equipment hire business in Australia; and Cash and other existing Seven investments.
Plans to create Seven Group Holdings were announced today by Mr Kerry Stokes, the Executive Chairman of ACE and Seven, and Mr Peter Ritchie, the Deputy Chairman and Independent Director of Seven. Mr Stokes said: “Seven and WesTrac Group are two great companies. Both are performing strongly and both have terrific opportunities for growth. We have had a long and proud association with both companies, which are both leaders in their respective areas, with what I consider the best management teams in the country. “Since the deal to create SMG, Seven has evolved into an investment holding company with strong media platforms and the financial capacity to expand into new sectors. We are excited about the potential opportunity this transaction has to transform Seven, and about the growth opportunity for all Seven shareholders.”
The parties have agreed an enterprise value of WesTrac Group of $2.0 billion, comprising an equity value of $1.0 billion and assumed net debt of $1.0 billion. As part of the agreed enterprise value, WesTrac’s investment in National Hire will be acquired at a value of $246 million. As ACE has been unable to provide Seven access to due diligence, ACE has underwritten this valuation as at 30 June 2011. Based on WesTrac Group forecast FY2011 EBITDA of $231 million and EBIT of $192 million, and excluding the underwritten value of National Hire ($246m), the terms imply a blended multiple for WesTrac Group of 7.83 x FY11E EBITDA and 9.43 x FY11E EBIT.
WesTrac Group has an ownership interest in three key businesses, a 100% interest in each of WesTrac Australia and WesTrac China and a 66% interest in National Hire Group Limited. WesTrac Group was established by ACE in 1990 with the WA territory, and expanded subsequently into North East China in 2001, and NSW/ACT in 2004, at the invitation of Caterpillar. WesTrac Australia operates the sole authorised Caterpillar dealer in WA, NSW and the ACT, providing equipment sales, service, and support, and is the market leader in each of these territories. WesTrac Australia services the mining, infrastructure, and non-residential construction markets in each of these regions. WesTrac is focused on equipment management through full equipment lifecycle and is not reliant solely on machine sales. WesTrac Australia is expected to achieve forecast sales and EBITDA of approximately $1.9 billion and $197 million respectively in FY2011.
www.sevengroup.com.au.
