Westrac merger a step closer

Stokes’ private company Australian Capital Equity has agreed to forego 15 million shares in the merged company worth around $130 million if Westrac does not meet its forecast EBITDA (earnings before interest, taxes, depreciation and amortisation) of $231 million for financial year 2011.Seven has also agreed to fast-track a “board renewal program” in response to investor concerns about the long tenure of the company’s independent directors.Ausbil Dexia and Perennial Value, which own a combined 28.1% of non-Stokes controlled Seven Network shares, have now agreed to vote in favour of the proposed merger at a shareholders’ meeting next week.Perennial Value managing director John Murray said the revised deal followed “many lengthy and frank discussions” with ACE.“We had reservations on the terms in the absence of this ACE commitment, and we also welcome the board renewal process,” Murray said. Stokes said Westrac was a “great company with excellent management” and he was confident about its prospects. “As a result, we are happy to demonstrate our level of confidence by standing behind Westrac’s future earnings,” he said.If Westrac failed to meet the 2011 forecast and Stokes forfeited the 15 million shares, his stake in the merged company would reduce by about 2% to 66.2% – still comfortably above the 60% control that Caterpillar required that Stokes retain before the company would approve the deal.Seven shares were up 4c to $7.72 in morning trade.

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