West Australian Newspapers shareholders get the short straw

Price at posting – $1.15 (ASX:SWM)

Why are the interests of small shareholders often forgotten in the so called pursuit of financial progress? Today, many original shareholders in the previously listed West Australian Newspapers group, before it succumbed to Seven Media Group’s merge offer in February 2011, may be wishing that Kerry Stokes had never set his sights on their company. And yet to some, the Stokes factor can do no wrong. For instance in the Australian Financial Review Chanticleer opinion piece that appeared on the paper’s back page on 17 July this year, columnist Tony Boyd couldn’t’ contain his excitement in proclaiming Kerry Stokes as the “Master tactician surveys all options.” At the time Boyd proclaimed that “The $440 million capital raising by Seven West Media is the latest piece of evidence to prove that Kerry Stokes is arguably the country’s smartest media mogul.” Why such a dilutive capital raising, left so late in the cycle can be described in such glowing terms was always hard to defend despite Boyd’s best efforts.

So it was refreshing to read James Chessell’s Due Diligence piece in the same paper on 1 October titled “Seven faces steep uphill battle.” Chessell convened a different view to that of Boyd, noting that while the merger had allowed private equity partner KKR to sell out of Seven West Group and saw the merger of television and newspaper, it also sealed the group’s financial fate noting “But in almost all other respects Seven West has proven to be a failure.” As Chessell rightly points out, the Seven West shares are now down 80.5% over the past 18 months, far more than both Fairfax Media and Ten Network Holdings so I doubt whether the old West Australian shareholders are in agreement with Boyd’s original assessment of the deal. No matter how you cut it, it’s easy to see who got the short straw in this deal.

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