Seven at home in Perth on Westrac deal

With a deal to sell Westrac to Seven Network more likely than ever after tough negotiations from big independent shareholders of the media company, the result will be a company heavily focused on Western Australia.

Westrac owner and Seven chairman Kerry Stokes has always had strong links to WA, where he made his early fortune. For much of his business career, however, Mr Stokes appeared to have bigger fish to fry on the east coast as head of one of Australia's three commercial free-to-air television networks.

In the mid-1990s he even sold a majority stake in Perth-based Community Newspapers to News Corp, diluting his WA interests.

Seven, of course, had historically above average exposure to Perth via its television station which has always been considered the local market leader, a position that Channel Nine used to occupy in most other states during Kerry Packer's long tenure.

And Mr Stokes has always retained a corporate office in West Perth, home to his private vehicle Australian Capital Equity which is run by his able lieutenant Peter Gammell. It owned his growing Caterpillar franchise, Westrac, which has a big exposure to WA's mining boom. Perth is also home to his big art collection and the Perth Entertainment Centre which sits on prime CBD land near the railway.

Nevertheless, until this past decade, the media magnate was more often noticed in Sydney and Melbourne.

More recently, though, Mr Stokes has become far more noticeable in Perth, especially since the mining boom took off.

In late 2006, Seven emerged with a big stake in WA Newspapers Holdings and by late 2007 Mr Stokes was agitating for seats on the board. After a bitter struggle, in which the magnate pitched his credentials as something of a local publishing white knight to both WAN shareholders and the state's reading public. By the end of 2008, he chaired the company and was in command.

In the same period, he sold off just over half of his Seven television network to private equity players and engineered a wayward investment in Perth-based engineering business GRD. ACE also took a stake in budding Pilbara play Iron Ore Holdings

This year, the WA focus has intensified. Seven has shifted its ISP developments from the disappointing Unwired experiment in NSW to a new start-up under the banner vividwireless which will spend $50 million developing the network in Perth but has yet to commit to a national roll-out.

The Westrac deal, if completed, will further that WA engagement.

Not only has Westrac got its management base here but at least half its 2008-09 Australian revenue and, presumably, earnings comes from its lucrative WA operations - based on the fact that machine sales were 597 in WA and 529 in the other Australian franchise, NSW/ACT.

Australian earnings before interest, tax, depreciation and amortisation were $184 million from a group total of $216 million. EBITDA if Seven and Westrac had been merged at June 30 last year would have been $309 million.

In addition, Mr Gammell will head the newly merged entity Seven Group Holdings and another WA resident, Westrac's managing director Jim Walker, will join that board.

All in all, Seven's shareholders are not just taking a bet on Westrac's ability to leverage growth in China via the resources sector. They are also following Mr Stokes lead into exposure to WA's consumer market which is also intrinsically linked to the burgeoning markets to our north.