MELBOURNE, Oct 8 (Reuters) - Shares in Seven West Media Ltd , owner of Australia's top-rated free-to-air television networks, surged by more than six percent on Monday on speculation of a buyout by its largest shareholder.
Seven West's shares have slumped 57 percent this year, faring worse than its listed peer Ten Network Holdings , which is down 47 percent, as advertising revenues have collapsed across the media sector, hitting profits.
Seven West Media went public last year through a merger with West Australian Newspapers. The group is 33 percent owned by Seven Group Holdings , controlled by magnate Kerry Stokes.
RBS analysts said in a research note that Seven Group Holdings could acquire the 67 percent of Seven West Media it does not already own at A$1.50 per share or about A$1 billion ($1.01 billion), most likely with a partner.
"We believe a joint privatisation (potentially with KKR) is more feasible," said RBS analyst Matthew Nicholas, referring to private equity firm KKR & Co which owns 6.9 percent of Seven West Media after selling down its stake last year.
Nicholas said an acquisition would make sense with the media sector close to the bottom of the advertising cycle, Seven West Media trading at a depressed multiple of 6.7 times forward earnings, and a desire for Seven Group to diversify away from mining services given the cooling of the mining boom.
Shares in Seven West jumped 6.5 percent to A$1.305 on active turnover, while Seven Group shares gained 2.5 percent to A$47.38.
In addition to the Seven Television network, Seven West also owns The West Australian newspaper, 50 percent of web site Yahoo!7, and the country's second-largest magazine group, Pacific Magazines.
Australia's second-rated network, privately owned Nine Entertainment Co Pty Ltd [CVC.UL} which owns top-rated TV network Channel Nine appears likely to fall into the hands of the lenders it owes A$2.7 billion, including Apollo Global Management and Oaktree Capital Group .
(Reporting by Victoria Thieberger; Editing by Eric Meijer)
Keywords: AUSTRALIA SEVENMEDIA/