Westrac, Seven merger needs communicating beyond the financial

For the economic analysts, shareholder associations and funds managers, the proposed merger of Kerry Stokes’ private company Westrac, into the listed Seven Network is at best an “unconventional proposal”.

At worst, it is viewed as an abomination, a proposal with nothing to recommend it; a whim or an exercise in personal power.

For the business press, the announcement of the proposed merger livened up a dull ending to a rainy month. Adele Ferguson in the Sydney Morning Herald business section on February 23, under the strapline Opinion & Analysis, suggested “Seven Network will morph into a rare breed of listed companies with a portfolio of businesses that have nothing in common” (my italics).

Ian Verrender on the same page and under the imaginatively cynical headline “Tractors and television make a lovely couple” suggested that “selling your privately owned business into the public company you control has never been a great look and is always guaranteed to trip the shark alarm”.

One analyst, Deloitte, imagined the proposed merger to be “fair and reasonable”.

If we take as a basic premise that a publicly listed company exists to make profit for shareholders, we need do nothing more than rationalise the proposal in terms of the bottom lines of both companies; Westrac has around $1 billion in debt (we can’t know the real numbers because it’s a private company) and Seven Network has around $1 billion in cash.

It’s too easy to see the private being bailed at the expense of the public and to conclude that Mr Stokes is up to mischief.

If however, we take a closer look at the actual sectors themselves, a look beyond the financial to that which the business journalists, analysts, fund managers and shareholder associations fail to see, we may find there are in fact some wholly decent synergies that make this merger a good long-term bet.

In this I am referring to the “culture” of the mining industry and the media and how culture might be communicated in a positive sense to stakeholders.

The headline over Verrender’s piece - “Tractors and television” - may reflect the objects that the mining and media sectors have at their disposal, but it is way off centre in providing a true image of the single culture that makes both of them peculiar and, highly valuable.

The culture that exists in mining and media is one and the same: contrary to Ms Ferguson’s comments above, they have everything in common - gung-ho, risky, immediate, blokey - all the things that individually terrify fund managers and collectively, present heart attack scenarios to shareholder associations and analysts.

Most businesses and governments today tend to be risk-averse - they look to the conservative in voters and shareholders and attempt to balance budgets and ROIs (return on investment) to keep the middle classes off their backs.