Seven West Media's plans for a smooth takeover of regional broadcaster Prime appear to have hit a rough patch.
Two key Prime shareholders -- billionaire Bruce Gordon and regional news player Antony Catalano -- have reportedly indicated they will reject Seven's scheme of arrangement.
Together they hold just over 25% of Prime which means that Seven West Media can't get to three-quarters of the shareholding needed to force the acqusition of the rest of the shares
Bruce Gordon, the owner of WIN Corporation and holding more than 11% of Prime, told The Australian: “We will not be supporting the scheme of arrangement as we believe that the proposal isn’t good value for current shareholders.”
Interests associated with Catalano -- who wants Prime to build out his regional media group -- holds almost 15% of the takeover target.
Seven West Media in October launched a takeover of Prime Media Group with an all share deal, a big first step by James Warburton, appointed CEO of Seven West Media in August, to transform the network and take on a soft advertising market.
The combined group would create a premium broadcast, video and news network with potential to reach more than 90% of Australia’s population each month.
Under the takeover deal, Prime shareholders get 0.4582 Seven West Media shares for each Prime share they hold .
Existing Seven West shareholders will end up with 90% of the combined entity, with Prime shareholders the remaining 10%.
The merger is expected to produce annual cost synergies of $11 million.
Seven West Media yesterday sweetened the deal with a fully franked special dividend of $0.03 per share conditional on Seven's scheme of arrangement being successful.
Catalono and investor Alex Waislitz bought Australian Community Media, formerly part of Fairfax before the Nine merger, for $125 million in June.
Combining regional newspaper titles with newrooms run by Prime would be a compelling reason for Catalano to acquire the regional broadcaster.
Catalano says he intends to vote against Seven West Media's, calling the special dividend nothing more than a regular half year payout which shareholders would get anyway.
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