ACCC approves Pacific sale to Bauer, are titles still worth $40m?

• Seven West Media CEO James Warburton has welcomed the decision by the ACCC

The ACCC will not oppose Bauer Media’s proposed acquisition of Pacific Magazines, after deciding the transaction was not likely to substantially lessen competition in relevant markets.

Seven West Media CEO James Warburton has welcomed the decision by the ACCC to approve the sale of Pacific Magazines to Bauer Media and expects the sale to complete within a fortnight.

Bauer has yet to comment on the ACCC decision and there is speculation it could be wanting to revisit the terms of the sale given the current market conditions that have pummelled consumer confidence and media values.

Warburton said: “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.”

Seven expects a completion of the sale of Pacific Magazines to Bauer Media will take place on April 9, 2020.

The ACCC assessed the impact of the merger, given the close competition between the parties’ key print magazines, Bauer’s Woman’s Day and Take 5, and Pacific Magazines’ New Idea and That’s Life!

“The significant declines in the circulation and revenue experienced by many magazines are sustained, substantial and likely to continue, resulting in less investment in content and fewer retail promotions,” ACCC chair Rod Sims said.

“We note that some magazine titles have already closed, and others are likely to follow, regardless of this deal.

“We also note that the content offered by the four key magazine titles, including celebrity news, ‘real life’ stories, puzzles, and food, health and lifestyle tips, is all available from other sources.

“Ultimately, we determined that although there is a notable level of competition between the particular print titles, the transaction was not likely to substantially lessen competition because publishers in other media, particularly online publishers, will increasingly compete with Bauer,” Sims said.

The ACCC found that while many of Bauer and Pacific Magazines’ customers value the tactile nature of physical magazines, they are often not regular buyers of the magazines. Further, increasingly others see online content as a ready alternative, and this should constrain Bauer’s ability to raise prices or reduce investment on content.

Background

The ACCC commenced a review of the proposed acquisition on 23 October 2019 and raised concerns about the acquisition in December.

Bauer Media is part of the Bauer Media Group, which is based in Hamburg, Germany. Bauer Media group is a privately owned international media company publishing over 600 magazine titles globally.

Pacific Magazines is a wholly-owned subsidiary of ASX-listed Seven West Media Limited. SWM is a national media provider across television, magazine and newspaper publishing and online platforms.

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