Seven West Media Ltd. (SWM), controlled by billionaire Kerry Stokes, jumped the most since July in Sydney trading after Royal Bank of Scotland Group Plc said the television broadcaster’s owners may attempt a buyout.
The stock rose 4.1 percent to A$1.275 at the local close, the biggest gain since July 20. Before today, the shares had sunk 60 percent this year.
Seven West has tumbled so much that Stokes’s Seven Group Holdings Ltd. (SVW), with a 33 percent stake, and buyout firm KKR & Co., with 12 percent, may make an “opportunistic” A$825 million ($837 million) bid for the remaining shares, RBS said in an Oct. 5 report. The appeal of Seven West’s television business would be central to any bid from Stokes, who is also the chairman of the media company, RBS said.
“The price has fallen to a level where the numbers start to look pretty attractive,” Fraser McLeish, a Sydney-based analyst at Royal Bank of Scotland, said by phone today. “They’ve got a good platform and the TV ratings remain pretty strong.”
Simon Francis, a spokesman for Perth, Western Australia- based Seven West, didn’t return a call seeking comment on the RBS report. Ian Smith, an Adelaide-based spokesman for KKR, declined to comment.
Stokes and KKR could generate an internal rate of return of 39 percent on their additional investment, according to McLeish. That assumes they pay A$1.50 a share for the 55 percent stake, and sell for eight times Seven West’s earnings before interest, taxes, depreciation and amortization in two years, he wrote in the report.
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