The recent developments with regards to the proposed changes to media ownership laws seem to have poised the mergers and acquisitions opportunity for biggies like Seven West Media, Nine and Ten networks who can now eye their regional affiliates, allowing them to have multiple newspaper, TV and radio platforms in one market. Particularly, the recently passed government’s media reform legislation has been applauded by News Corp Australia, Fairfax Media Ltd and Seven West Media Ltd who now aim to have a better market share.

With this backdrop, some movement has been noted between Fairfax Media Ltd (ASX: FXJ) and Seven West Media Ltd (ASX: SWM). The market saw FXJ’s stock surging about 0.53% on September 18, 2017 while Seven West Media Ltd traded 0.69% lower at the back of news swirling around the discussions between the two media players on a potential partnership ahead of the media ownership laws’ changes. As indicated above, the recent reforms passed in the Senate indicated that media businesses can now take part in mergers and transactions, and this opens up an opportunity for FXJ and SWM considering their balance sheet and debt positions (though SWM’s long-term debt is on a higher side).

At the moment, the discussions look like to be on a tentative ground and at a nascent stage. In fact, it has been said that the media players have been approaching many companies ahead of the reforms being implemented into the law. This is also seen to come after Fairfax and Nine’s failed attempt to reach an agreement on merger of sales functions of the companies among many other ideas on equity interests. Primarily, Fairfax’s print assets seem to have created a disparity in terms of asset value and related costs. On the other hand, any fruitful discussion between FXJ and SWM can help bring Fairfax’s regional newspaper network, key publication titles including The Sydney Morning Herald and Financial Review, and digital ventures together with Seven’s television network, daily newspapers and radio networks.

Fairfax has always indicated that the group is open to opportunities for consolidation that improve shareholder value. In coherence, Seven West has highlighted that the group is not speculating on any particular outcome while not ruling anything out or anything in. The key idea floated by both the companies is to look at a range of possibilities which would benefit both. It is also said that Fairfax has been keen on its idea for the spin-off of Domain and might look at deals only in view of the given interest.

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