Antony Catalano has questioned Seven West Media's proposal to swallow Prime Media, revealing that interests associated with his publishing business Australian Community Media now control a 10 per cent stake in the regional broadcaster.
Speaking publicly for the first time on his holding in Seven West's beleaguered regional TV affiliate, Mr Catalano said the proposed merger was "not a deal we would accept in its current form".
"Channel Seven aren't paying a control premium for Prime," the executive chairman of ACM said.
"Instead they are offering a discount. I can't imagine too many shareholders are impressed with that."
Prime's half-year dividends and tens of millions of dollars in franking credits had also not been factored into the deal.
Under the proposed merger, Prime shareholders would receive 0.4582 Seven shares for each Prime share - a three per cent discount to the share price at the time the deal was announced in October.
Seven shareholders would end up with 90 per cent of the combined business. Prime investors would own the remaining 10 per cent.
The offer has been unanimously recommended by the Prime board but needs the approval of 75 per cent of votes cast by shareholders at an extraordinary general meeting expected to be held in mid-December.
The voting intentions of Bermuda-based billionaire Bruce Gordon, who holds about 15 per cent of Prime, are not yet known.
Mr Gordon is the owner of rival regional broadcaster WIN Network, and also holds 15 per cent of Nine Entertainment Co.
In a notice filed with the Australian Stock Exchange today, interests associated with Mr Catalano and his partner Alex Waislitz's Thorney Investment Group disclosed that they hold 10.26 per cent of Prime, or 37,589,435 shares.
Mr Catalano declined to comment on whether he would acquire more Prime shares or align with other shareholders to try to block the Seven deal.
It is understood, however, that Prime has long figured in Mr Catalano's plans and that he and Thorney had a stake in the broadcaster before Seven's proposal was announced.
"We said from day one that our intention was to build the biggest regional media business in the country and we embarked on that by buying ACM and investing in Prime," Mr Catalano said.
"As regional media owners and operators, it is not unreasonable that we would look at consolidation."
The former Domain CEO previously failed in an attempt to thwart the $4 billion merger of Nine and Fairfax Media.
A last-ditch attempt in the Federal Court could not prevent that deal from going ahead.
Partnering with Mr Waislitz and his Thorney Investment Group, Mr Catalano ended up buying the ACM business from Nine for $115 million and took control of such publications as The Canberra Times, Newcastle Herald and Bendigo Advertiser on July 1.
While Mr Catalano controlled less than five per cent of the shares of Fairfax when he challenged the Nine deal, his stake in Prime is more significant and is strongly aligned to his ambitions to grow regional media.
"It doesn't suit us as shareholders or media owners and operators who have invested heavily in the sector," he said of the Seven offer.
The former long-time Fairfax executive told a Sydney media conference in September that he saw an opportunity for consolidation between the radio, print and TV businesses serving regional Australians.
"Unless I've got that scale the business won't be as robust as it could be," he told the conference, adding that regional media faced a "crisis" without changes to ownership rules, including the "one-to-a-market" rule that prevents control of multiple TV licences in one area.
Prime Media non-executive chairman John Hartigan said this week that regional broadcasters faced a bleak future without substantial regulatory reform, noting that WIN TV's closure of regional newsrooms in July was not likely to be the last this financial year.
The Australian Communications and Media Authority (ACMA) found this week that Mr Gordon's shareholding in Prime breached media control and diversity rules when he acquired an 11.59 per cent stake in April on top of an existing 14.99 per cent interest.
He sold down his shareholding by 11.73 per cent a month later, bringing him under the 15 per cent threshold that legally means a person has "control" of a media asset.
Mr Gordon told ACMA the breach was the result of a third party acting contrary to his instructions and he acted immediately to sell down his holding when he became aware of the mistake.
The authority said on Tuesday it would take no further action because Mr Gordon could not reasonably have known that he was in breach of media laws.
Prime closed on Tuesday at 20c a share, up 8.1 per cent. Seven West Media closed at 38c a share, down 2.56 per cent.
Australian Community Media is the publisher of this website.
- James Joyce is executive editor of ACM.