Seven to Form $4 Billion Media Joint Venture With KKR

Seven to Form $4 Billion Media Joint Venture With KKR

SYDNEY, Australia, Nov. 19 /PRNewswire/ -- Seven Network Limited today announced the execution of definitive agreements for the formation of a joint venture with Kohlberg Kravis Roberts & Co. (KKR). The new joint venture will be Seven and KKR's vehicle to pursue media opportunities in Australia and New Zealand. The joint venture, the Seven Media Group, will include Seven's television, magazines and online businesses and values those businesses at A$4.0 billion.

Today's agreement underlines Seven's strong and competitive broadcast television and magazines publishing businesses and rapidly developing Yahoo!7 partnership, which provides the platform for Seven's development in online and new content delivery platforms.

Executive Chairman of Seven Network Limited Kerry Stokes said: "We have a terrific partner in KKR. KKR is an astute and experienced investor in media businesses, together we have the know-how to build and expand the strength of the Seven media businesses. We share the same views on strengthening and building Seven's competitive and financial performance. Today's agreement delivers to Seven, our people and our shareholders a venture with the strategic and financial flexibility to take advantage of the dynamics of the Australian and New Zealand media landscape."

George Roberts, Founding Partner of KKR, said: "We are delighted to be entering into partnership with Kerry Stokes and Seven. KKR is excited to be joining a partner committed to media and building the Seven Media Group with us. The business has tremendous momentum and is well positioned to benefit from changes in the media environment. We are looking forward to working with Seven's very impressive management team to continue to build the new venture into Australia and New Zealand's leading media company."

Seven has established its Australian television market leadership in total viewers and in advertising revenue share. It is rated number one in prime time, news, public affairs and breakfast television.

KKR will invest approximately $735 million for a 50 per cent economic stake in the venture, which will own Seven's television and magazines businesses and its 50 per cent interest in the Yahoo!7 joint venture. The Seven Media Group will also be subject to the requirements of the Yahoo!7 joint venture agreement, which will continue as the primary vehicle for online interests.

The Seven Media Group has obtained underwritten financing from Morgan Stanley, Mizuho, Goldman Sachs and Citigroup of which approximately $2.5 billion will be drawn on closing. Seven will receive cash proceeds of approximately $3.2 billion and will retain a 50 per cent economic stake in the joint venture. KKR's investment will initially be in the form of convertible notes which may not be converted until after the recent amendments to the Broadcasting Services Act ("BSA") are proclaimed to take effect.

The Seven Media Group will not impact the employment of Seven's staff. Seven will retain its holdings in Western Australian Newspapers Limited, its 34 per cent shareholding in Engin, its real estate interests in New South Wales, Victoria and Western Australia, its Seven Asia business and various non-core investments.

Seven will also retain its subsidiary C7 Pty Limited which, together with Seven, are applicants in the C7 litigation which is awaiting judgment in the Federal Court. Seven will also retain the benefit of the subscription television rights for the 2007-11 seasons in the Australian Football League and the forthcoming Olympic Games in Beijing in 2008.

Mr. Stokes will be the Chairman of the Seven Media Group and will retain his role as Executive Chairman of Seven. The Chief Executive Officer of the new venture will be Seven's Chief Executive Officer, Broadcast Television, David Leckie, and the Chief Financial Officer will be Peter Lewis. Mr. Leckie and Mr. Lewis will retain their current roles with Seven.

Following the amendments to the BSA taking effect, Seven and KKR will each be entitled to appoint four members to the Board of Directors of the Seven Media Group. In addition, the CEO and CFO will also be board members.

Completion is expected to occur in late December 2006. Seven will seek the approval of its shareholders under the financial assistance provisions (Section 260B) of the Corporations Act with respect to certain elements of the financing, which is to be secured by a Seven Network Limited guarantee until approval is obtained.

There are no material conditions to the transaction. It is expected that documents related to the financial assistance approval will be dispatched to Seven Network Limited shareholders within a week.

About Seven:

Seven Network Limited is a multi-faceted media company in Australia - with a market-leading presence in broadcast television, magazines publishing and online and expanding new communications platforms in a joint venture with Yahoo Inc in Australia. Seven's broadcast television platform reaches 98 per cent of Australians. Seven's magazines publishing business, Pacific Magazines publishes more than one in five magazines sold in Australia, including three of the biggest selling magazines. Seven's Yahoo!7 joint venture with Yahoo Inc combines the strengths of Yahoo's search and communications capabilities and its global internet network with Seven's media and entertainment content and marketing capabilities. The joint venture is driving the online, mobile and IPTV businesses of both companies in Australia.

About KKR:

KKR is one of the world's oldest and most experienced private equity firms specialising in management buyouts, with offices in New York, Menlo Park, California, London, Paris, Hong Kong and Tokyo. Throughout its history, KKR has brought a long-term investment approach to its portfolio companies, focusing on working in partnership with management teams and investing for future competitiveness and growth. Over the past thirty years, KKR has completed 146 transactions with a total value of approximately US$263 billion. KKR has significant experience in investing in media businesses and has invested in transactions in the sector with a total value in excess of US$35 billion. For more information, please visit www.kkr.com.

Advisers:

Seven: Morgan Stanley which also acted as co-senior debt arrangers, Freehills, Ernst & Young

KKR: O'Sullivan Pullini (exclusive financial adviser), Baker & McKenzie, Simpson Thacher & Bartlett LLP and Deloitte

Contacts:

Seven:
Simon Francis +61 (02) 8777 7162
+61 (0) 418 777 748

KKR
Sue Cato, Cato Counsel +61 (02) 9360 6606
+61 (0) 419 282 319

Source: KKR

CONTACT: Seven: Simon Francis, +61-02-8777-7162, +61-418-777-748; KKR:
Sue Cato, Cato Counsel, +61-02-9360-6606, +61-419-282-319

Web site: http://www.kkr.com/

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