Southern Cross-Seven Merger Valued at $1.8 Billion with $30 Million Annual Synergies

Independent Expert Report Validates Merger Proposal

Southern Cross Media Group Limited (ASX – SXL) has received a comprehensive independent expert report from Kroll Australia Pty Ltd, which concludes that the proposed merger with Seven West Media Limited (ASX – SWM) is in the best interests of Southern Cross shareholders, excluding certain related parties. This report is a critical milestone in the merger process, providing a detailed assessment of the fairness and reasonableness of the transaction.

A Merger of Equals with Strategic Synergies

The merger is structured as a scheme of arrangement, with Southern Cross shareholders to own approximately 50.1% and Seven shareholders 49.9% of the combined entity. Kroll’s analysis treats the deal as a merger of equals, reflecting the near-equal ownership split and complementary business profiles. The combined group is expected to generate annual pre-tax cost synergies in the range of $25 million to $30 million, achievable within 18 to 24 months post-completion.

These synergies primarily stem from overlapping functions, corporate cost efficiencies, and enhanced negotiating power with advertisers and suppliers. The report notes that while these synergies are conservatively estimated and benchmarked against comparable media transactions, there remain execution risks and timing uncertainties.

Financial and Strategic Benefits for Shareholders

The combined group will be a leading integrated media company in Australia, with pro forma FY25 revenues of approximately $1.8 billion and a diversified portfolio spanning broadcast TV, radio, digital audio, streaming, and publishing. Southern Cross shareholders are expected to benefit from increased scale, diversification, and exposure to growing digital platforms such as Southern Cross’s LiSTNR and Seven’s 7plus.

Financially, the merger is expected to be accretive to Southern Cross shareholders’ earnings per share, with pro forma FY25 EPS increasing significantly compared to Southern Cross standalone. However, the combined entity will carry higher gearing, with a pro forma net debt to equity ratio of approximately 63.6%, reflecting Seven’s higher leverage. This elevated leverage may impact dividend policy and financial flexibility in the near term.

Governance and Regulatory Outlook

Governance arrangements for the combined group include a board initially composed of eight directors, with representation from both Southern Cross and Seven. Jeff Howard, current CEO of Seven, will lead the combined group as CEO and Managing Director, while Southern Cross CEO John Kelly will become Group Managing Director, Audio.

The merger remains subject to several conditions precedent, including regulatory approvals from the Australian Competition and Consumer Commission (ACCC), Australian Communications and Media Authority (ACMA), Australian Securities and Investments Commission (ASIC), and the ASX. The ACCC’s informal review commenced in mid-October 2025, with findings expected by December 18, 2025. Additionally, shareholder approval from Seven West Media is required.

Risks and Market Implications

While the merger promises strategic and financial benefits, the report highlights risks including integration challenges, potential delays or shortfalls in synergy realization, and exposure to structural declines in traditional broadcast TV and print media markets. The combined group will face intensified competition from global streaming platforms and evolving consumer preferences.

Market participants should monitor regulatory developments closely, as well as shareholder meetings and integration progress, to gauge the merger’s ultimate impact on the Australian media landscape.