Rationalisation of the Australian commercial radio industry
In this week’s video insight, I delve into the events of mid-October, specifically focusing on the collaborative proposal by ARN Media and Anchorage Capital Partners for a non-binding, indicative acquisition of Southern Cross Media. The merger sparked concerns about market dominance, particularly in the commercial radio sector in metropolitan Australia, leading to scrutiny from the ACCC. Notably, over the weekend, Kerry Stokes’ Seven West Media strategically acquired a 20 per cent stake in ARN Media, raising questions about his broader interests across Australia. The developments add layers of intrigue to the future of Australia’s commercial radio sector, making it a captivating subject to observe.
In the middle of October, ARN Media (ASX: A1N), and the private equity firm, Anchorage Capital Partners, lodged a “consortium”, non-binding, indicative proposal to acquire Southern Cross Media (ASX: SXL).
Each company had built a 15 per cent stake in Southern Cross Media, and if their offer is successful it was intended for the radio and television assets of ARN Media and Southern Cross Media to be separated into an independent ownership structure by each of ARN Media and Anchorage Capital Partners.
The offer for Southern Cross Media was for 0.753 ARN Media shares plus 29.6 cents per Southern Cross Media share. If successful, Southern Cross Media shareholders would end up with 33 per cent of ARN Media, and would qualify for the capital gains tax rollover relief.
In terms of the radio assets, ARN Media is home to 104 radio stations including the Kyle and Jackie O show, the KIIS FM and Pure Gold brands, as well as a network of regional brands. Meanwhile Southern Cross Media owns 99 radio stations under the Triple M and Hit brands as well as Channel 7 in Tasmania and Darwin. A merger would create a metropolitan network of 10 radio stations in Sydney, Melbourne, Brisbane, Adelaide, and Perth underwritten by the KIIS and Triple M brands.
The potential merger would raise the eyebrows of the powers to be at the Australian Competition and Consumer Commission given the resulting dominance in the commercial radio market in metropolitan Australia.
Over the weekend, Kerry Stokes’ Seven West Media made a lightning strike, by effectively acquiring 20 per cent of ARN Media at $1.10 per share, and this was a 31 per cent premium on last Friday’s close of $0.84 per share. I understand Stokes is supportive of ARN Media’s move on Southern cross Media.
In one of the most concentrated media markets in the western world, the current Australian media laws allow these media ‘gorillas’ to “dominate” only two of the television, radio, and newspaper sectors.
Seven owns the Seven Network in Sydney, Melbourne, Brisbane, Adelaide, and Perth and, logically, Kerry Stokes maybe interested in ultimately adding Channel Seven in Tasmania and Darwin. However, a much bigger play in Australian commercial radio sector could be at stake, and Stokes’ divestment of Seven West Media’s newspapers, the Western Australian and the Sunday Times, may even be considered.
The potential arm wrestle for the rationalisation of Australia’s commercial radio sector will be very interesting to watch over the foreseeable future.