ARN acquisition of Southern Cross Austereo (pending approval)

Radio, Print, and Online
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No. ACP will be completely independent from ARN. The takeover panel’s concern is that due to ARN’s stake in SCA, a separate company which has shares in ARN and SCA is in control of too much of SCA launch a takeover. These provisions exist so that minority shareholders can’t be unfairly disadvantaged by the power of a larger shareholder.

I’ve discussed the options around this before in this topic. I don’t know which avenue they’ll go down, but neither are ideal. They either keep the stations unchanged and swap a good station for a poor station, or they create mass confusion with a name moving to a new frequency, where it will have different announcers and a format that doesn’t match Triple M, possibly requiring the former Gold/WSFM to change formats and drop ratings.

The proposal says:
“Retain 5 of its existing metro radio stations plus acquire 5 of SCA’s metro radio stations”
This suggests that it’s the actual licences that will transfer, not just the brand.

They’ll need to do something if they want to own a KIIS and Triple M station in Perth.

This is an inherent problem with Fox being the more dominant station in Melbourne and KIIS being dominant in Sydney. But ARN have shown that they’re not too invested in the success of Melbourne. They’re happy in the Sydney office as long as the Sydney stations are doing well.

I agree, this could be the approach. ACP need to get something other than a pile of shit.

The proposal says:
“ACP is expected to own and operate a separate network of 8 metro and 35 regional radio stations, plus SCA’s existing television and digital audio businesses.”
I can’t work out how they get to 35 regionals, but that’s a lot more than the dregs which they’ll have to get rid of. Given the hubbed nature of SCA’s stations, but 35 stations could include a reasonable sized network of regional station in one or multiple states.

There would need to be moves. This has happened before with mergers. in Albury The River and 2AY switched locations when Macquarie took over DMG and RG Capital. As the same time, Cairns and Townsville each ended up with 4 stations under the same roof, and they shared facilities for close to a decade until Grant Broadcasters built new studios.

I don’t think anywhere in Hobart has existing facilities for an easy move. As far as I know the 7HO and SCA buildings both only have 2 radio studios. ARN might be able house 2 stations in cramped quarters until they can build a bigger space, otherwise they’ll just share some space for a while.

That’s not much of a concern. ARN don’t have a tech in Hobart, so BA are probably already contracted to do all the transmission work at Mt Wellington. It’s really just a matter of paperwork to say who owns what, so the owners of various pieces can change relatively easily.

Not really. The licence is only split for the purpose of having different content, and even then there’s restrictions on how different the content can be. For QTQ, it was 30 minutes per day, but I believe they had to air the same ads. For 5AU/5CS it was just breakfast, but I think they’re identical just with different ads now. They can’t sell them separately as it’s still just one licence.

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SCA Hobart have 3 radio studios and a news booth (+ TV studio). A decent chunk of their floor is sub-let to Hill Street Grocer (has been since COVID) and is separated by a glass divider. They share a reception, kitchen and toilets.

Possibly space there to build more studios & offices, if Hill Street moved out.

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I’ve run through the licences, and I think I’ve worked out a way that the stations can be split based on the information given in the proposal:

  1. [ARN] Retain 5 of its existing metro radio stations plus acquire 5 of SCA’s metro radio stations
  2. [ARN] Retain 37 of its existing regional radio stations plus acquire 51 of SCA’s regional radio stations
  3. [ARN] A larger, growing and profitable regional radio footprint comprised of 88 stations up from 47
    today, plus full ownership of ARN’s two existing stations in Canberra
  4. ACP is expected to retain ultimate ownership of all existing SCA radio stations not being acquired by ARN, plus acquire 3 metro and 10 regional radio stations from ARN
  5. ACP is expected to own and operate a separate network of 8 metro and 35 regional radio stations, plus SCA’s existing television and digital audio businesses.

To summarise,
ARN will have:

  • 5 metro stations currently owned by ARN
  • 5 metro stations currently owned by SCA
  • 2 stations in Canberra (currently a joint-venture with SCA, to be 100% owned by ARN)
  • 88 regional stations (excluding Canberra) - 37 currently owned by ARN, 51 currently owned by SCA

ACP will have:

  • 5 metro stations currently owned by SCA
  • 3 metro stations currently owned by ARN
  • 35 regional stations - 10 currently owned by ARN, 25 currently owned by SCA

Based on ownership limits:

  • ACP must get 2 stations in Cairns, Townsville, Mackay, Rockhampton/Gladstone,
  • ACP must get at least 1 station in Bendigo, Mildura, Bundaberg, Gold Coast, Hobart
  • If ARN want 2 stations in Brisbane, they must divest River 94.9 and Hot 91
  • The overlap of Newcastle and Muswellbrook means ARN can only have 2 of those stations.

The numbers work out perfectly if ACP get the currently Albury and Townsville hubs, along with all stations served by them (allowing for FM stations to be switch for AM stations so that ARN have 2 FM’s where possible), except Bendigo and Mildura where there is no change.

ARN
10 metros:
KIIS 106.5, Sydney (ARN)
KIIS 101.1, Melbourne (ARN)
KIIS 97.3, Brisbane (ARN)
Mix 102.3, Adelaide (ARN)
96 FM, Perth (ARN)
Triple M, Sydney (SCA)
Triple M, Melbourne (SCA)
Triple M, Brisbane (SCA)
Triple M, Adelaide (SCA)
Triple M, Perth (SCA)
2 Canberra:
104.7, Canberra (SCA/ARN)
Mix 106.3, Canberra (SCA/ARN)
88 regionals:
Queensland (13)
Triple M, Gold Coast (SCA)
Hot Tomato, Gold Coast (ARN)
Triple M, Townsville (SCA)
Star 106.3, Townsville (ARN)
Triple M, Cairns (SCA)
Star 102.7, Cairns (ARN)
Triple M, Mackay (SCA)
Star 101.9, Mackay (ARN)
Triple M, Rockhampton/Gladstone (SCA)
hit, Rockhampton/Gladstone (SCA)
Triple M, Bundaberg (SCA)
Hitz FM, Bundaberg (ARN)
Zinc 96.1, Sunshine Coast (ARN)
NSW (21)
CADA, Katoomba (ARN)
Triple M, Newcastle (SCA)
hit, Newcastle (SCA)
Triple M, Gosford (Central Coast) (SCA)
hit, Gosford (Central Coast) (SCA)
hit, Coffs Harbour (SCA)
Triple M, Coffs Harbour (SCA)
Triple M, Port Macquarie/Kempsey (SCA)
hit, Port Macquarie/Kempsey (SCA)
Triple M, Dubbo (SCA)
Triple M, Orange (SCA)
hit, Orange (SCA)
Triple M, Wagga Wagga (SCA)
hit, Wagga Wagga (SCA)
Triple M, Griffith (SCA)
hit, Griffith (SCA)
Wave FM, Wollongong (ARN)
Power FM, Nowra (ARN)
2ST, Nowra (ARN)
Power FM, Bega (ARN)
2EC, Bega (ARN)
Victoria (4)
Power FM, Ballarat (ARN)
3BA, Ballarat (ARN)
Gold 1071, Bendigo (ARN)
River 1467, Mildura (ARN)
SA/NT (10)
Power FM, Murray Bridge (ARN)
5MU, Murray Bridge (ARN)
Magic 93.1, Berri (ARN)
5RM, Berri (ARN)
Magic 105.9, Spencer Gulf North (ARN)
5AU/5CS, Spencer Gulf North (ARN)
Magic 89.9, Port Lincoln (ARN)
5CC, Port Lincoln (ARN)
Hot 100, Darwin (ARN)
Mix 104.9, Darwin (ARN)
Tasmania (12)
Triple M, Hobart (SCA)
7HO FM, Hobart (ARN)
Chilli, Launceston (ARN)
LA FM, Launceston (ARN)
Chilli, Scottsdale (ARN)
7SD, Scottsdale (ARN)
Sea FM, Devonport (ARN)
7AD, Devonport (ARN)
Sea FM, Burnie (ARN)
7BU, Burnie (ARN)
7XS, Queenstown (ARN)
7AUS KIX, Queenstown (ARN)
Western Australia (28)
hit WA, Albany (SCA)
Triple M (6VA), Albany (SCA)
Triple M (6BY), Bridgetown (Southwest) (SCA)
hit WA, Bridgetown (Southwest) (SCA)
Triple M (6TZ), Bunbury (Southwest) (SCA)
hit WA, Bunbury (Southwest) (SCA)
Triple M (6SE), Esperance (SCA)
hit WA, Esperence (SCA)
hit WA, Kalgoorlie (Goldfields) (SCA)
Triple M (6KG), Kalgoorlie (Goldfields) (SCA)
hit WA, Katanning (SCA)
Triple M (6WB), Katanning (SCA)
hit WA, Merredin (Central Wheatbelt) (SCA)
Triple M (6MD), Merredin (Central Wheatbelt) (SCA)
hit WA, Narrogin (SCA)
Triple M (6NA), Narrogin (SCA)
hit WA, Northam (Avon Valley) (SCA)
Triple M (6AM), Northam (Avon Valley) (SCA)
hit WA, Geradlton (SCA)
Triple M, Geradlton (SCA)
hit WA, Karratha (SCA)
Triple M, Karratha (SCA)
hit WA, Hedland/Broome (SCA)
Triple M, Hedland/Broome (SCA)
hit WA, Carnarvon (SCA)
Triple M, Carnarvon (SCA)
hit WA, Remote WA (SCA)
Triple M, Remote WA (SCA)

ACP:
8 metros:
Fox FM, Melbourne (SCA)
2Day FM, Sydney (SCA)
B105, Brisbane (SCA)
SAFM, Adelaide (SCA)
Mix 94.5, Perth (SCA)
Gold 104.3, Melbourne (ARN)
WSFM, Sydney (ARN)
Cruise 1323, Adelaide (ARN)
35 regionals:
Queensland (19)
Sea FM, Gold Coast (SCA)
hit, Townsville (SCA)
Power 100, Townsville (ARN)
hit, Cairns (SCA)
4CA, Cairns (ARN)
hit, Mareeba (SCA)
hit, Mackay (SCA)
4MK, Mackay (ARN)
4CC, Rockhampton/Gladstone (ARN)
4RO, Rockhampton/Gladstone (ARN)
4BU, Bundaberg (ARN)
hit, Maryborough (SCA)
Triple M, Maryborough (SCA)
hit, Toowoomba (SCA)
Triple M, Toowoomba (SCA)
hit, Emerald (SCA)
hit, Kingaroy (SCA)
hit, Mount Isa (SCA)
hit, Roma (SCA)
River 94.9, Ipswich (ARN)
Hot 91.1, Sunshine Coast (ARN)
Victoria/SA/Southern NSW/Tasmania (12)
hit, Albury (SCA)
Triple M, Albury (SCA)
hit, Shepparton (SCA)
Triple M, Shepparton (SCA)
hit, Bendigo (SCA)
Triple M, Bendigo (SCA)
hit, Mildura (SCA)
Triple M, Mildura (SCA)
Triple M, Warragul/Gippsland (SCA)
Triple M, Mount Gambier (SCA)
hit, Mount Gambier (SCA)
hit, Hobart (SCA)
NSW (2)
Power FM, Muswellbrook (ARN)
2NM, Muswellbrook (ARN)

This isn’t necessarily the final list or even close, but it’s the best I can work out to explain the numbers and demonstrates the size of the regional network ACP will get. Given that SCA’s current setup is based around the hubs, I think it makes sense to keep them as is.

I note that the above list assumes ARN keep Zinc 96.1 and CADA.

There’s an argument that Zinc is better to stay with Hot 91 given they share facilities.

CADA should be divested as the unique situation which allows ARN to own 96.1 is because the WSFM licence is technically for Western Sydney. Therefore, that “exception” moves with the WSFM licence so CADA should aswell, however I think ARN will want to keep CADA and argue that WSFM isn’t really a Western Sydney licence anymore and switching WSFM for Triple M makes no different.

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ACMA should really enforce this one - its a ridiculous situation that has been allowed to continue for too long. They don’t allow it in any other market, why is the Katoomba market special?

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I explored this just last month in the CADA thread here: Cada (formerly The Edge 96.1) - #424 by webguy

In this case it actually isn’t the ACMA asleep at the wheel, rather it’s a quirk in the legislation which based on the distribution of stations and licence areas can only happen in this one scenario. It was challenged in court by Austereo in the late 90s and given the green light based on the wording of the legislation.

In my opinion, I believe it was written so that in a scenario like Ipswich-Brisbane-Nambour, where Brisbane has a significant overlap with both, a broadcast should be allowed to own a single licence in all 3 as Ipswich and Nambour never overlap (as ARN do now), but it was never considered how the exception would apply in a scenario where all 3 licence areas overlap with both the other licence areas.

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Interesting read put out by Morningstar today suggesting ARN’s bid significantly undervalues SCA

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Morningstar have also maintained that SCA is significantly undervalued for sometime now. Before the ARN offer they’d determined the share price to be nearly 60% below fair value.

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If this goes ahead my biggest question is what will ARN do with Triple M? Hopefully they’ll make some big changes!! De-boganing it would be a great start, more focus on the music would also be great. I think they are bound to make some improvements.

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I wouldn’t get my hopes up.

ARN probably want Triple M because of its current offering which makes it attractive (Rock, Sport & Comedy + regional variety stations).

I doubt ARN would “turn Triple M on its head”, as much as we’d all like to see that be done.

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I’ll settle for minor improvements or whatever we can get LoL.

I kind of think it’s more the national footprint of the 5 major capitals that might be the prize for them, rather than the content itself, or even the brand.

There’s even a slight chance they’re foxing and would consider keeping a Gold/KIIS combo in the metros and spin off Triple M in Sydney and Melbourne to ACP.
Eg. FM104 Brisbane, 104.7 Adelaide and 96FM Perth join Gold and WS.

Anyway one can dream.

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I somewhat agree with that last comment.

I could see ARN doing similar to what Macquarie Radio did to Fairfax. Macquarie really wanted 3AW to join its number one Sydney station - but as a result, was “stuck with” 2UE. There is no doubt there’ll be some chopping and changing once the dust starts to settle.

The Fox would surely have to be in ARN’s sights.

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It’s the Football. It makes big money, both the AFL and NRL. The ratings for football on Triple M is somewhat obscured because the ratings don’t give a breakdown by shift on the weekends. ARN tried to get the football rights for Gold last time they came around, but failed.

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I dunno, I guess that’s true but I’d like to see some evidence. I think Melbourne and maybe Adelaide get good ratings for football on Triple M but I remain unconvinced about Sydney, Brisbane and Perth.

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The valuation seems low based on the small number of recent radio transactions - if single AM stations are going for near $10m a piece, and Grant’s regional network got $307m, SCA seems terribly undervalued for what radio stations are going for, given the limited opportunities.

But there’s no real buyers out there, so how can something be valuable when there’s not really any company wanting to take on legacy media assets - it’s only the massive content libraries that are driving other takeovers, and the media diversity rules means you can’t get real consolidation.

Similarly, I can’t see much private equity interest - SCA is basically already being run on the kind of efficiency drives that you’d institute to try and spin a bigger profit out of the stations, which likely explains why Anchorage aren’t going it alone - you probably can take the remnants of SCA, and part it out for more value than they will be putting in.

If this sale doesn’t go through - I think you’ll just see SCA’s share price fall further, not some big new offer that trumps it. You could maybe make money by selling off the various parts of SCA, but getting it all done in one transaction has some value for SCA shareholders.

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Before ARN’s offer, SCA shares were trading at 73 cents, valuing the company at $175m.
ARN’s initial offer price is 94 cents, valuing the company at $225m.
Based on that offer, shares are now hovering around the offer price because that’s what shareholders will get if the takeover goes ahead.

However, SCA have a lot of debt. The balance sheet at 30 June 2023 shows total liabilities of $594m. Add that back in and it values the assets at $769m and $819m respectively based on the above share prices.

Maybe that’s still a bit low considering what ARN paid for Grant Broadcasters and 96FM, but it’s certainly closer to the mark.

I think the reason why SCA has been undervalued for a while because of the uncertainty around the future of the company and it’s debt. While the underlying assets have value and have been performing fairly well (mostly - not the case for a few metros) the debt and interest payments just wipe that out. There’s been speculation of the company folding or being broken up in a fire sale for too long. It’s like being sold a BMW (a good car, but no Ferrari) and being told “it’s a good car, but you might need to sent it to the wreckers for cents on the dollar (or nothing even) at any time”.

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What you’re missing with the SCA valuation is, that they have very little assets in the company that can be sold if it goes broke or the debts are called upon to be paid immediately, they have the broadcasting licences, but technically if they go broke they go back to ACMA, the only real assets (using the term loosely in some circumstances) is their content, most of their Studios are now leased, & they don’t own any transmission facilities or transmitters, BAI own them all.

To anyone purchasing SCA or any part of it (including ARN), if they don’t want to take over the studio leases, & work with BAI on transmission, the new owners have to start again with a large capital outlay, on top of any purchase price of a station for the licence, staff, content/IP.

ARN paid the price they did for Grant Broadcasters which valued that network higher because they owned a lot of their studios & still owned many transmission sites & all transmission equipment, Grant Broadcasters had a much larger asset holding, giving value to the company that SCA don’t have.

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Realistically how much is all that worth? There is nothing different about this from any other business these days.

By far the most valuable asset of any broadcaster is the license to broadcast. It’s what allows them to exist and protects them from competition. Without the licence, the other assets are also virtually worthless except for land value. The licence will always hold value to someone else (at the right price) - it’s not like if SCA folded someone else wouldn’t want the opportunity to broadcast to every city in the country.

Just like what happened with Ten. They went into administration, despite your claims, the licence didn’t go back to the ACMA (because there is no provision for that in tue Broadcasting Services Act) and CBS bought them out for what was still a lot of money.

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Didn’t CBS buy Ten because they were Ten’s largest creditor, owed about $170m, therefore they had the option of buying the company when Ten went into administration?

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Transmission facilities are worth quite a lot, the licence is useless if you have nothing to broadcast on & those assets could be sold to other operators if needed to use or make money off e.g towers for other operators & mobile phone.

Broadcast licences are only leased, even though a lot of money is often parted with for them, they always along with the spectrum, remained owned by ACMA & the Australian Government/public tax payers & can be taken back at any time for pretty much any reason.

The licences for TEN didn’t go back to ACMA because TEN never went out of business, they were in administration for a few days before Paramount took control as they were owed more than the company was worth, so it never actually stopped operating, it made it through administration.

Had Paramount or someone else not taken over & Administrators wrapped things up, licences would’ve gone back to ACMA & their other assets (studios, etc) would’ve been sold off, with the money going to TEN’s creditors.
TEN’s transmitters were/are owned by TX Australia, so no money could be made off selling them as a TEN asset, same as SCA’s transmission facillites are owned by BAI, so if any of them a sold BAI gets the money not SCA, even though SCA uses them & their business depends on them.

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Awful as by having national bulletins, local journos at other news hubs were sent on leave and unavailable to cover serious local weather problems.

LCLC is an ACMA term, Local Content Licence Condition. Plenty of reading on their website for starters.

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