Kerry Stokes’ Seven West Media (SWM) plans to raise between $150 million and $612 million in a rights issue aimed at getting rid of 2,500 convertible preference shares that if not extinguished in a year’s time, would prevent the company from paying dividends.
The shares – worth $250 million – were issued as part of the merger of the old Seven network and West Australian Newspapers in the consolidation of the media interests of Mr Stokes.
They were to be either redeemed or changed by April 20 next year but the sharp fall in the Seven West share price in the past two years – the conversion price is much higher than the market price – more than $6 as opposed to the market price on Tuesday of $1.36, before trading was halted yesterday.
The probe was raised at the company’s interim profit announcement and Seven and its advisors have been working on it ever since. The deal is essentially a capital raising designed to extinguish the shares and raise around $150 million from shareholders, which will be used to reduce debt.
Seven West shares went into a trading halt on yesterday morning to allow the issue to start.
SVW 1Y – Seven West in new rights issue
It will offer shareholders new shares at $1.25 each – a 7% discount to the average price in the five days of trading up till Tuesday.
Seven’s biggest shareholder Kerry Stokes’ Seven Group Holdings has agreed not to participate. SGH will convert its convertible preference shares in Seven West Media into equity at $1.28 a share.
Seven West Media said in a statement that Seven Group’s shareholding could rise up to 45% from its current 35%.
But it said if all eligible shareholders participated in the rights issue Seven Group’s holding would remain unchanged.
"All eligible shareholders who take up their entitlements will retain at least their current shareholding percentage ownership," the company said.
It said the cash proceeds of at least $150 million from the rights issue will be used to reduce its net debt ratio to two times earnings.
Seven also reaffirmed its full year guidance on Wednesday. Net profit after tax is expected to be between $205 million and $215 million, based on current market conditions.
It said the advertising market remained "short, providing limited visibility" and subdued given soft economic conditions.
The issue will go to a shareholders meeting scheduled for June 2.
