ARN Media forced to divest $16m in shares of takeover target Southern Cross Media

ARN Media forced to divest $16m in shares of takeover target Southern Cross Media

Radio stars Kyle and Jackie O, both former employees of Southern Cross Media, recently extended their contracts with ARN by 10 years through to the end of 2034. Photo via Facebook.

An M&A tussle involving some of the biggest powerbrokers in Australian media has taken a new turn today after the Takeovers Panel ordered KIIS FM owner ARN Media (ASX: A1N) to sell around $16 million worth of shares in takeover target Southern Cross Media (ASX: SXL).

ARN Media's $224 million bid for Triple M owner Southern Cross is backed by Anchorage Capital Partners, and last month attracted an indirect interest from Seven West Media (ASX: SWM) which forked out a premium price of $50.1 million to buy 14.9 per cent of ARN, lifting its stake to just under a fifth.

A few days prior to Seven West's investment, Antony Catalano and Alex Waislitz's Australian Community Media (ACM) had also thrown its hat in the ring with plans to merge with Southern Cross Media, in a move that would combine the radio and TV broadcaster with their network of regional publications.

The ability to garner shareholder votes is of the essence when there are so many competing interests in the target company, and a Catalano-affiliated investment group called Keybridge Capital (ASX: KBC) saw the opportunity to strike its rival just a week after ARN Media came on the scene with its bid.

In a complaint to the Takeovers Panel, Keybridge said that in mid-June ARN had purchased 14.8 per cent of Southern Cross shares from contrarian investment firm Allan Gray, which happened to also own shares in ARN itself. 

As a result, even though Allan Gray informed the market that its voting power at Southern Cross had declined, Keybridge alleged that its voting power had actually risen to levels above permitted thresholds under the Corporations Act via its holding in the suitor ARN.

The Takeovers Panel ruled in Keybridge's favour and declared unacceptable circumstances over the matter. 

What that now means in practice can be seen in the panel's orders that ARN must vest 6.83 per cent of Southern Cross - more than 16.37 million shares - to the Australian Securities and Investments Commission (ASIC) for sale.

At the time of writing, Southern Cross shares were down 4.35 per cent at 99 cents per share (cps), meaning the divestment would be worth approximately $16 million.

The panel has also accepted undertakings from Allan Gray that the firm will sell a further 0.08 per cent of Southern Cross shares within three months, and provide a corrective substantial holder notice in relation to its holding in Southern Cross in a form approved by the panel.

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