The ACCC has given the green light for Bauer’s $40 million purchase of rival Pacific Magazines after the final decision, which was understood to be handed down in April, was brought forward and revealed today.
It is anticipated that completion of the sale of Pacific Magazines to Bauer Media will take place on April 9, 2020.
The merger now leaves Australia with only two major magazine publishers – News Life Media and Bauer.
In a statement this morning, the ACCC said it “had concluded that the proposed acquisition is unlikely to substantially lessen competition in any market.”
It added: “Magazine publishers have suffered significant and progressive circulation and revenue declines in the last ten years, which has resulted in less investment in content and fewer retail promotions. In particular, the ACCC noted that significant circulation and revenue declines in the last few years has resulted in the closure of magazine titles, with further magazine title closures in the future regardless of the proposed acquisition,” the statement read.
Seven CEO James Warburton commented: “We welcome today’s regulatory approval of the sale of Pacific Magazines to Bauer Media. This transaction provides $40 million in cash consideration (pre-adjustments and leave provisions). Additionally, the $6.6 million of advertising we are receiving from Bauer over three years further enhances the value of the sale, allowing the titles to continue to reach the valuable audiences SWM commands.
“Pacific Magazines has always been an important part of Seven West Media and will leave a lasting legacy, and I want to personally thank the hard working and dedicated team who have worked tirelessly to transform the business in response to changing market conditions. These efforts mean that Pacific’s assets will have a bright future as part of a larger group with Bauer, and SWM will maintain a relationship through the successful television show Better Homes and Gardens,” Warburton said.
Murmurings of a potential merger between the two media giants started in early October 2019, when it was revealed Seven West Media was negotiating to offload its Pacific Magazines business to Bauer Media.
In December, Pac Mag’s CEO Gereurd Roberts moved to Seven as chief digital officer.
Pacific Magazines currently publish titles such as Better Home And Gardens, marie claire, Who, New Idea and Men’s and Women’s Health.
There is an enormous crossover between the two publishers, both playing heavily in the women’s glossies, food genres. So redundancies would be expected.
According to Seven’s annual report last year, Pac Magazines generated revenue of just shy of $130 million for the financial year, down 7.2 per cent from $139.5 million the previous year.
In late October, it was revealed Seven signed a binding agreement to sell Pacific Magazines to Bauer Media for a cash consideration of $40 million, subject to ACCC approval.
However, in mid-December, the ACCC issued a statement citing concerns over the proposed acquisition, suggesting it is likely to lessen “competitive tension” by reducing the number of major print magazine publishers in key magazine categories from two to one.
The ACCC was also concerned about the loss of competition in the supply of content to readers between Woman’s Day (Bauer) and New Idea (Pacific Magazines), and the loss of competition between Take 5 (Bauer) and That’s Life! (Pacific Magazines).
In particular, the ACCC was focussed on the loss of competition for the acquisition of rights to exclusive photos.
Both Seven and Bauer responded to the statement, suggesting it is both “disappointing” and that the ACCC has taken an “overly narrow view”.
B&T understands the sale of Pac Mags will be used to pay down debt, improving SWM’s balance sheet flexibility and simplifying the organisation. And, it couldn’t come at a better time for Seven, with news the broadcaster’s two major drawing cards – the Olympics and AFL – have been postponed due to the coronavirus crisis.
As part of the merger, SWM and Bauer Media also entered into commercial arrangements to mutually benefit both parties, including advertising spend commitments, the ongoing production of Better Homes and Gardens television programme, and sharing lifestyle content under a long-term agreement.
In addition, SWM will receive $6.6 million of advertising on Bauer Media assets over three years.
The green light of the sale could also spell good news for Bauer, with reports early this year suggesting private equity group Mercury had plans to buy Bauer Media, but binned the potential purchase over the stand-off between Bauer, Pac Mags and the ACCC.
