Seven, KKR set up A$4bn joint-venture

Australia’s Seven Network is creating a joint-venture vehicle with private equity firm Kohlberg Kravis Roberts (KKR) to pursue new media opportunities in Australia and New Zealand.

The newly minted Seven Media Group, the set-up of which is intended to be completed before the end of the year, will include all of Seven’s television, magazine and online businesses, valued by Seven at A$4bn (US$3bn).

KKR will invest approximately A$735m for a 50% economic stake in the venture, which will also own Seven’s 50% interest in the Yahoo!7 online joint-venture and will continue as the primary vehicle for online interests.

Seven, which says the agreement underlines its broadcast and online expansion strategy, will receive cash proceeds of approximately A$3.2bn and will retain a 50% economic stake in the joint venture.

Executive chairman of Seven Network, Kerry Stokes, said that KKR’s experience with investment in the media industry gives Seven the know-how to build and expand the strength of the Seven media businesses.

“We share the same views on strengthening and building Seven’s competitive and financial performance. Today’s agreement delivers to Seven, our people and our shareholders a venture with the strategic and financial flexibility to take advantage of the dynamics of the Australian and New Zealand media landscape,” said Kerry.

George Roberts, founding partner of KKR, said that Seven Media Group has “tremendous momentum” and is well positioned to benefit from changes in the media environment, following the easing of cross-ownership rules in the media space.

Stokes will become chairman of the Seven Media Group and will retain his role as executive chairman of Seven. The CEO of the new venture will be Seven’s current CEO of broadcast television, David Leckie, and the CFO will be Peter Lewis; both will retain their current roles with Seven.

Documents related to the financial assistance approval are expected to be dispatched to Seven Network Limited shareholders within a week. Morgan Stanley, Goldman Sachs and Citigroup are underwriting the deal, lending A$2.5bn.