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Bauer Media's proposed $40 million acquisition of Seven West Media (ASX: SWM) owned Pacific Magazines has received regulatory approval from the Australian Competition and Consumer Commission (ACCC).
The ACCC has decided the merger of the two businesses is not likely to substantially lessen competition in the magazine market.
In December, the ACCC raised some red flags about the acquisition, saying the deal could reduce competitiveness in the weekly magazine market.
Specifically, the watchdog was concerned that Bauer owned magazine Woman's Day competed closely with New Idea, owned by Pacific Media, and Bauer's Take 5 magazine competed strongly with Pacific Magazines' That's Life.
"Ultimately, we determined that although there is a notable level of competition between the particular print titles, the transaction was not likely to substantially lessen competition because publishers in other media, particularly online publishers, will increasingly compete with Bauer," says ACCC chair Rod Sims.
Sims also says that the market both Bauer and Pacific Magazines currently operates in is struggling irrespective of the merger.
"The significant declines in the circulation and revenue experienced by many magazines are sustained, substantial and likely to continue, resulting in less investment in content and fewer retail promotions," says Sims.
"We note that some magazine titles have already closed, and others are likely to follow, regardless of this deal."
"We also note that the content offered by the four key magazine titles, including celebrity news, 'real life' stories, puzzles, and food, health and lifestyle tips, is all available from other sources."
The ACCC found that while many of Bauer and Pacific Magazines' customers value the tactile nature of physical magazines, they are often not regular buyers of the magazines. Further, increasingly others see online content as a ready alternative, and this should constrain Bauer's ability to raise prices or reduce investment on content.
Seven West Media has welcomed the ACCC's decision, with CEO and managing director James Warburton saying the deal will allow the publications managed by Pacific Magazines to thrive under Bauer's leadership.
"The $6.6 million of advertising we are receiving from Bauer over three years further enhances the value of the sale, allowing the titles to continue to reach the valuable audiences SWM commands," says Warburton.
"Pacific Magazines has always been an important part of Seven West Media and will leave a lasting legacy, and I want to personally thank the hard working and dedicated team who have worked tirelessly to transform the business in response to changing market conditions.
"These efforts mean the Pacific's assets will have a bright future as part of a larger group with Bauer, and SWM will maintain a relationship through the successful television show Better Homes and Gardens."
The completion of the sale of Pacific Magazines to Bauer Media will take place on April 9, 2020.
Shares in SWM are up 8.7 per cent to $0.08 per share at 12:11PM AEDT.
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