The Sydney Morning Herald reports that ARN Media has teamed up with private equity firm Anchorage Capital Partners to lob a non-binding takeover offer for rival radio broadcaster Southern Cross Media that values the company at $330 million.
ARN owns major radio stations including KIIS FM while Southern Cross houses the national Hit and Triple M networks. Southern Cross shares surged after the bid was announced.
To comply with Australian media ownership laws, the combined assets would be split across two companies, the ASX-listed ARN, and a newly created, privately owned media company controlled by Anchorage.
Under the proposal, ARN would bundle the KIIS Network with Triple M across the five key metro markets, also acquiring 51 of Southern Cross Austereo’s regional radio stations, taking its total to 88 regional stations nationally. It would also move to 100 per cent ownership of Mix 106.3 and 104.7 FM in Canberra.
ARN’s Pure Gold Network (present in Melbourne, Sydney and Adelaide), home to the likes of Christian O’Connell and Jonesy and Amanda, would shift to the privately owned company, sitting alongside the national Hit Network. It would also house Southern Cross’s remaining regional stations, 10 more regional stations from ARN, Southern Cross Austereo’s ailing regional television business, and digital audio business LiSTNR.
The companies confirmed in statements to the ASX on Wednesday morning that ARN and Anchorage had made an indicative proposal under which Southern Cross Media shareholders would receive 0.753 ARN shares and 29.6¢ in cash for each Southern Cross share they own.
That implies a bid value of 94¢ per Southern Cross share, or $225.5 million in total. The stock closed at 73¢ on Tuesday, putting the offer at a 29 per cent premium to the company’s last share price. Including net debt, the bid gives Southern Cross an enterprise valuation of $330 million.
Southern Cross shares jumped 15.4 per cent to 84¢ as of 10.23am, while ARN’s shares dropped 4.1 per cent to 82¢ at 12pm.
Confirming receipt of the bid on Wednesday, Southern Cross called the proposal “unsolicited, complex and highly conditional” in an ASX statement, recommending shareholders take no action in relation to the proposal.
“The indicative proposal is subject to the unanimous recommendation of the SCA board, due diligence, shareholder and regulatory approvals from both the ACCC and ACMA, and other terms and conditions.”
Current competition rules in Australia state that one person or media company can be in ownership of no more than two commercial radio licences, the rules in place to maintain diversity of ownership and voice.
Speculation had been building about a looming takeover, with The Australian Financial Review reporting that the offer would be announced as soon as midweek.
ARN is currently in the process of finalising negotiations for an extended 10-year contract for Kyle and Jackie O, which could include an extension of their broadcast into the Melbourne market.