The deal is expected to result in annualised synergies of at least $11 million, though sources close to the transaction expect this could be as high as $20 million.
“We recognise that Prime Media faces challenging stand-alone prospects due to ongoing disruption that has caused a decline in the regional television advertising market,” the report says.
“We also understand that the company lacks the scale and financial resources necessary to move away from its existing content model whereby virtually all content is sourced exclusively from Seven.
“Overall, we believe the strategic rationale for the proposed transaction is reasonable and we expect shareholders could benefit from participating in a larger media company with greater scale.”
The report did not comment at length about the depth or thoroughness of the strategic review of the board or other alternatives considered, saying there was no substantive disclosure by the directors about the process used to come to the decision to recommend the deal.
However, Prime has not received any superior offers since the announcement of the deal on October 18 and CGI Glass Lewis said it recognised the board’s position that “an alternative offer is unlikely to emerge” as Prime and Seven have a programming supply agreement.
Prime is Seven’s regional affiliate and has a control restriction that allows Seven to end the deal if there’s a change in control of the company.
One of Prime’s largest shareholders, rival WIN TV owner and Bermuda-based billionaire Bruce Gordon, is in Australia this week and regional media sources said he was organising meetings to discuss the deal. Mr Gordon has not commented on how he will vote or his opinion on the offer price.