Pacific Star buys Morrison Media
Pacific Star Network, who operate SEN and MyMP in Melbourne, have stated in their last two annual reports that they have been looking for acquisitions. Overnight, they have announced that they have acquired Morrison Media for $10.8m.
Morrison Media is a privately held print and digital publisher which publishes frankie, Smith Journal, Surfing Life, Slow Living and White Horses.
Publishing is not new to Pacific Star, they have owned the AFL magazine 'Inside Football' for a couple of years, and this acquisition will mean the company derives more earnings from publishing than from radio.
In a statement, Pacific Star said;
Today, Pacific Star Network Limited embarks on a strategy to broaden its activity, and commences the diversification of the PNW portfolio beyond broadcasting and sport.
PNW believes there is a gap between small independent content businesses and large media groups. PNW aims to fill this gap by investing in innovative media brands and content-driven businesses.
Morrison Media fits within this strategy and expands PNW’s media offering to the advertising market and creates increased scale across the group, in particular, leveraging the Morrison Media digital expertise for the delivery of SEN’s sporting content.
Morrison Media will operate as a standalone division of PNW – it will be business as usual.
Whilst this expansion out of radio into publishing, particularly to the extent that the earnings from radio are smaller, appears unusual, Pacific Star have explained the rationale to the acquisition, they have said;
"In recent years, PNW has generated strong revenue and earnings growth from its radio business, particularly 1116SEN, which provides the majority of PNW's revenue and earnings.
At its core, 1116SEN broadcasts to a niche, engaged largely male audience of predominantly Melbourne- based followers of sports. This has contributed to the strong growth in earnings for PNW as targeting such a niche (and highly engaged) audience has provided the opportunity to command premium advertising dollars. The corollary is that high growth rates can be difficult to sustain within the existing formats, without pushing into new markets.
Whilst the fundamentals of PNW's existing business remain solid, PNW has recognised the need to diversify its business away from the reliance on 1116SEN, and to leverage the other existing assets of the business.
The acquisition of MM is the first step in that process."
Pacific Star will acquire Morrison Media for $10.8m, which with EBITDA of $2.2m is a purchase multiple of 4.9x. The aquisition will be funded through existing cash, a bank facility of $8.6m and a capital raising of $4.0m.
The acquisition, and the capital raising, are subject to shareholder approval which will be voted on in December.