A shake-up of Australia’s broadcast media landscape is on the cards after KIIS FM owner ARN Media (ASX: A1N) launched a $225 million takeover bid for Triple M owner Southern Cross Media Group (ASX: SXL), in a move that aims to split the combined group’s radio and television assets.
ARN Media says the proposal will create two separate national media organisations competing against each other in metropolitan and regional radio markets, which the company implies is designed to allay any potential regulatory concerns.
However, Southern Cross has immediately branded the bid as ‘unsolicited, complex, and highly conditional’, recommending shareholders take no action in relation to the indicative proposal.
With the backing of private equity group Anchorage Capital Partners, ARN Media is proposing Southern Cross shareholders will receive 0.753 ARN shares and 29.6c cash per Southern Cross share.
Based on yesterday’s closing price of 85c for ARN shares, the bid values Southern Cross at 94c a share.
ARN’s shares fell to a low of 80c following today’s announcement while Southern Cross shares surged as high as 89c, up 22 per cent, before settling back to 85c by 10.47am (AEDT).
ARN owns 104 radio stations and DAB digital stations nationally, while Southern Cross operates a total of 99 stations.
Southern Cross also owns Network 10 TV channels in regional Queensland, southern NSW and Victoria, as well as Channel Seven in Tasmania and Darwin.
The merger will create a metro radio network of 10 radio stations in Sydney, Melbourne, Brisbane, Adelaide and Perth, anchored by the KIIS and Triple M brands.
The company’s regional footprint will almost double to 88 stations from 47 at present, as well as full ownership of ARN’s two existing stations in Canberra.
“There is a significant value creation opportunity bringing together certain ARN and SCA radio and digital audio assets,” says ARN CEO Ciaran Davis.
“ARN is ideally positioned to support and operate an expanded regional radio network and as a combined group of scale in digital audio, positioned to compete efficiently and effectively with international competitors.”
ARN says a successful merger of these operations is a ‘material value creation opportunity’ through the combination of ARN and Southern Cross radio and digital audio assets.
It sayt this will also enhance growth potential and ‘an accelerated path to profitability through a proposed digital audio joint venture of greater scale’.
“The board has carefully considered numerous strategic options to continue the company’s growth and believe this transaction would be transformative for both sets of shareholders,” says ARN Media chairman Hamish McLennan.
“ARN’s regional radio footprint would be almost doubled while we would maintain a focused metro radio network, underpinned by the recognised KIIS and Triple M brands in metro areas. The increased scale supports the potential for future index inclusion and liquidity once the transaction is complete.”
Southern Cross Media notes that the proposed bid is subject to the unanimous approval of its board, due diligence, shareholder approval and regulatory approvals from the Australian Competition and Consumer Commission and ACMA.
The Southern Cross board has appointed Grant Samuel as its financial adviser and Corrs Chambers Westgarth as its legal adviser to assess the proposed offer.
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