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Independent expert says Kerry Stokes' Seven Network and WesTrac merger is fair, but small shareholders might need convincing

An independent expert has told Seven Network shareholders that a merger between the media group and Kerry Stokes private heavy equipment business WesTrac is fair, although the valuations released by the expert indicated minority shareholders may actually lose out on the deal.

The $3 billion merger, announced on February 22, will see Seven and WesTrac combined to form a new company, Seven Group Holdings.

Kerry Stokes, the majority shareholder of Seven Network and the 100% owner of WesTrac, will emerge with 68% of the merged business if the deal goes ahead. Stokes is not allowed to vote on the deal as he is a "related party".

That means the fate of the deal lies with Seven's monitory shareholders, led by institutional shareholders Ausbil Dexia and Perennial Investment Partners, who are yet to indicate whether they will vote in favour of the merger.

However, they may be unimpressed by the fact that the independent expert's valuations of Seven Network and the merged entity, Seven Group Holdings, are quite different.

The expert's valuation Seven Network implies a value of $8.57, while the valuation of the merged group implies a valuation of $7.83. The difference between the two valuations relates to a lack of a premium for a change of control.

But the 15.5% gap between the two valuations might lead some minority shareholders to question whether the deal is really in their best interests.

They are also unlikely to be impressed by comments from Federal Court judge Justice Peter Jacobsen, who approved the shareholders meeting to vote on the deal but said there were "no apparent business synergies" and said the merged entity would have "some degree of borrowings which do not exist in Seven Network".

Shareholders will vote on the proposal on April 20. If the merger is approved it will return to the Federal Court on April 23 for final legal approval.

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