UPDATE 7am: West Australian Newspapers' independent directors have unanimously approved a proposal for the company to buy chairman Kerry Stokes' television and magazine interests.
As revealed by The West Australian and thewest.com.au, WAN this morning announced a plan to buy Seven Media Group from Mr Stokes' Seven Group Holdings and US private equity group KKR for $4.1 billion in cash and shares.
WAN will raise $693 million in fresh equity from new and existing investors as part of the transaction, the bulk of it through a four-for-seven rights issue at $5.20 a share.
Representing WAN's independent directors, Doug Flynn said the purchase was "an opportunity to comprehensively transform WAN into a diverse and integrated national media group in one step".
WAN will be renamed Seven West Media under the transaction, with the combined group to headed by Seven Media chief executive David Leckie.
Mr Stokes is the majority shareholder of Seven Group and the chairman of both Seven Group and WAN.
Under the transaction, Seven Group will receive $1.08 billion in new WAN shares, issued at $5.99 apiece, and $250 million in WAN convertible preference shares. It will also be repaid a $650 million loan owed by Seven Media.
In addition to the fundraising, KKR will take up a $461 million placement in WAN.
The combined equity raising of more than $1 billion will be used to repay the Seven Media loan and reduce the group's $2.104 billion debt by $450 million.
WAN shareholders will vote on the proposal at a meeting on April 11. Seven will be excluded from voting its 23.8 per cent stake, which will increase to 29.5 per cent through the deal.
"This transaction is an opportunity for Australian shareholders to gain exposure to some of the best media assets in Australia, with the combined business leveraging the highly successful management teams from both WAN and Seven Media," Mr Stokes said.
The acquisition is aimed at reducing WAN's earnings reliance on The West Australian and WA, while creating multi-platform media company with the size and financial power to chase acquisitions.
The combined company will own not only the The West Australian and WA regional newspapers and radio stations, but the Seven TV network and a suite of magazine titles, including marie claire, Better Homes and Gardens, New Idea and Men's Health.
Mr Stokes told ABC Radio this morning he wasn’t expecting any staff redundancies as a result of the deal.
He said the WAN and Seven newsrooms would continue to operate separately on a competitive basis.
Confirmation of the acquisition coincided with news that WAN recorded an interim profit rise of just 1.2 per cent to $50.11 million. Seven Group's half-year results, also released today, revealed better than expected results from Seven Media.
WAN said an independent expert's report from Ernst & Young had rated the Seven Media transaction fair and reasonable.
WAN is valued by the stockmarket at about $1.4 billion.
A lack of scale and a dearth of major takeover opportunities in WA have made it difficult for the group to expand in recent years.
WAN looked briefly beyond media in 2005 when it bought half the Hoyts cinema chain but quit the investment at a loss after just two years, conceding it was a mistake.
The Seven Media deal will likely face heavy scrutiny from investors and the Australian Competition and Consumer Commission.
It is the second big deal Mr Stokes has announced inside a year after the $1 billion sale of his WesTrac heavy equipment business to Seven last April.
The latest deal has a historical tie, reuniting Channel Seven Perth with the company which founded the station in 1959.WAN quit the station in 1970.
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