Shareholders put their faith in Kerry Stokes, back Seven-WesTrac merger

Seven Network shareholders have overwhelmingly put their faith in billionaire Kerry Stokes by backing his plan to merge the Seven media business with his privately-held heavy equipment business WesTrac.

Stokes, who will control 68% of the newly merged entity, to be known as Seven Group Holdings, was not allowed to vote at the shareholder meeting because of his relationship to the two companies.

However, fears that he had failed to convince minority shareholder to back the deal proved unfounded, with 69% of shareholders, representing 89% of the shares voted, supported the deal.

That was despite two prominent corporate governance advisers recommending shareholders reject the deal.

Stokes, who controversially missed the meeting, released a statement saying he “greatly appreciated” the faith of the shareholders.

“We think that the combination of the two companies will offer growth opportunities for all Seven shareholders and it is that growth potential that prompted us to embark upon this exercise.”

Stokes faces a few more hurdles relating to the merger.

First, he has to get the merger approved by the Federal Court, which will examine the deal on Friday.

Secondly, he has to make the merger work and particularly deliver on WesTrac’s forecast earnings target of $230.5 million in 2010-11.

If he fails to do so, Stokes will be forced to cancel 15 million of the 115 million shares he will receive under the merger, under a deal he made with Seven’s largest minority shareholders, hedge fund managers Ausbil Dexia and Perennial Value.

Given that WesTrac owns the rights to sell Caterpillar equipment in the ACT, NSW and the mining rich regions of Western Australia and north-eastern China, Stokes appears confident of meeting his forecast.

The shareholders who have put their faith in the media-mogul-turned-mining-baron will be watching closely to make sure he does.