Nope. That’s not what I’m looking for. And I’m more YT Music Premium than Spotify. Neither can yet replicate a well thought out playlist, the type you can get on Rebel, Breeze, Virgin Radio UK, Radio Caroline, Radio X, BBC R1 or R2. Even Magic or Smooth UK now runs rings around Smooth in Australia.
Not sure where you’re getting all the “variety” from in Australian radio, surely not the dour and lazy offerings on DAB.
I doubt regional Australia would agree with you. People stuck with maybe a Triple M/Hit combo, or worse a BoG combo.
Whereas small town NZ have a suite of stations offering all sorts of formats (Breeze, The Rock, The Sound, Coast, More FM…the list goes on).
Same in small city US and Canada. All the formats covered.
I actually don’t care if they’re networked. I listen to The Breeze or Rebel here wherever I am.
Even capital city stations here are mostly networked now so what’s the difference?
ARN have made an announcement to the ASX
I cannot see this new deal being remotely appealing to SCA. I think the status quo will now prevail.
ARN is claiming this is a better value deal ($1.20/share vs $1.04/share for the original (revised) offer)
But the tv assets and the poor performing Hit network will send the company into the abyss IMO.
SCA’s turn
Vibe seems to be that it leaves them with the bits they don’t want (tv) and reduces their interest in the bits that perform (listnr)
Which is not too different from the original offer, except rather than having private equity carry the can, it’s SCA shareholders. Will be interesting to see what their response is given a number have been vocal about the performance of SCA
Exactly my same thoughts.
If no deal takes place could SCA end up doing a Mildura and shut down the SCA tv network.
This would leave TEN a metro only network, and could send them to the brink too.
This deal could actually impact three players after what is happening in Mildura.
SYDNEY, Monday 13 May 2024 – ARN Media Limited (ASX: A1N) (“ARN”) refers to its non-binding indicative offer made in partnership with Anchorage Capital Partners Pty Limited (“ACP”, and together with ARN, the “Consortium”) to acquire 100% of the fully diluted share capital of Southern Cross Media Group Limited (ASX: SXL) (“SCA”) (the “Consortium Proposal”) dated 18 October 2023. A copy of the Consortium Proposal was provided by ARN to the ASX on 18 October 2023.
Under the Consortium Proposal, ARN would acquire certain radio stations currently owned by SCA and ACP would acquire the remaining SCA radio stations in addition to certain ARN radio stations. ARN would have ultimately owned an expanded national radio network and 50% of an independently managed joint venture holding ARN and SCA’s digital audio assets and operations (“Digital Joint Venture”). ACP would have acquired a national radio network complementary to the SCA television network it was to acquire across Queensland, New South Wales, Victoria, South Australia, Tasmania and Western Australia (“Regional TV”), as well as a 50% interest in the Digital Joint Venture.
As consideration, SCA shareholders would have received 0.753 ARN shares (the “ARN Exchange Ratio”) and 29.6 cents cash per SCA share (the “Consortium Proposal Consideration”). Based on the last closing price of ARN shares prior to the Consortium Proposal being made (A$0.855 on 17 October 2023), the Consortium Proposal Consideration implied a total value of A$0.940 per SCA share before the benefit of any franking credits distributed in connection with the proposed transaction. This represented an attractive 29% premium to the undisturbed SCA share price of A$0.730 on 17 October 2023 (46% including franking credits).
On 15 March 2024, the Consortium indicated that it was willing to adjust the ARN Exchange Ratio to up to 0.870 ARN shares per fully diluted SCA share (“Revised ARN Exchange Ratio”) subject to the satisfactory completion of due diligence. Based on the last closing price of ARN shares prior to the Consortium Proposal being made, the Revised ARN Exchange Ratio implied up to an additional 10 cents of value per fully diluted SCA share.
Following a period of due diligence engagement with SCA, ACP has notified ARN of its withdrawal from the Consortium. As part of its due diligence, ACP and its advisers completed an extensive review of Regional TV. In light of a continued decline in the trading performance of Regional TV since the Consortium Proposal was made in October 2023, the further deteriorating outlook for Regional TV, and the existing long-term contractual obligation of SCA for outsourced TV broadcast transmission, it does not support ACP’s Regional TV investment thesis. As a result, the Consortium must withdraw the Consortium Proposal. ARN thanks ACP for its constructive engagement as a Consortium partner and recognises the considerable investment of time and resources that ACP has made over the last seven months.
Notwithstanding ACP’s decision, ARN continues to consider the acquisition of certain SCA radio assets and the combination of ARN and SCA digital audio assets as a unique opportunity to unlock both immediate and long-term value creation. ARN and SCA shareholders were both expected to benefit from the creation of a focused metro radio network of 10 stations across Sydney, Melbourne, Brisbane, Adelaide and Perth, anchored by the KIIS and Triple M brands in each location, an expanded and
growing regional radio network, and a scaled, fast-growing digital audio platform with enhanced profitability and cash flow potential. Post-transaction, ARN was expected to have FY24PF revenues of over A$440 million, FY24PF EBITDA (pre-AASB16) of over A$105 million before combination benefits, and leverage of less than 1.5x. This excludes material expected future upside from the Digital Joint Venture, which was expected to contribute meaningfully to profit and cashflow in the near term.
To preserve this compelling opportunity for ARN and SCA shareholders, ARN intends to engage with SCA on a revised non-binding indicative proposal (the “ARN Indicative Proposal”).1
Under the ARN Indicative Proposal, ARN would acquire the same radio assets as under the Consortium Proposal plus assume 100% ownership of the combined digital audio assets of ARN and SCA (the “ARN Transaction Perimeter”). SCA shareholders would receive up to 0.870 ARN ordinary shares for each fully diluted SCA share subject to the satisfactory completion of due diligence, consistent with the Revised ARN Exchange Ratio pursuant to the Consortium Proposal. SCA shareholders would also retain their shareholding in SCA or receive their equivalent shareholding in a newly listed demerged entity that would hold the radio and television assets previously expected to be acquired by ACP under the Consortium Proposal (“New SCA”).
New SCA would own a national network of 44 radio stations, comprised of 5 HIT and 3 Gold-branded metro stations and 36 regional radio stations. It would be listed on the ASX with an independent Board and management, and is expected to have approximately A$350 million of FY24PF revenue and A$40 million of combined FY24PF radio and television EBITDA (pre-AASB16) on a stand-alone basis before adjusting for expected margin expansion from identified material cost efficiency initiatives. New SCA would operate with a conservative capital structure of approximately 1.0x FY24PF EBITDA2 and have sufficient flexibility to pursue standalone growth opportunities. New SCA would also enter into a long- term content supply agreement with the ARN-owned digital audio platform, unlocking an additional revenue stream for New SCA and enabling both parties to benefit from combined scale and efficiency of investment in digital audio.
ARN believes that the ARN Indicative Proposal is expected to deliver total value per fully diluted SCA share of approximately A$1.20 in total share consideration.3 This is in excess of the A$1.04 implied by the Consortium Proposal with the Revised ARN Exchange Ratio (which was a mix of share and cash consideration and had the potential for access to an additional value of 12.7 cents per SCA share from franking credits distributed to eligible SCA shareholders in connection with the proposed transaction).
ARN is supportive of working with SCA to explore any alternative proposals it may receive with respect to New SCA that provide either greater value or cash certainty for SCA shareholders, including alternative proposals that relate to a third party acquiring New SCA’s radio or Regional TV assets on a combined or separated basis. Further, ARN is prepared to work with SCA to review the ARN and New SCA transaction perimeters to optimise the strategic and value outcome for both sets of shareholders, to ensure a strong competitive outcome for each business.
ARN and SCA have been working collaboratively, are now substantially complete on mutual due diligence, and are progressed on transaction documentation. ARN remains committed to delivering an
1 The ARN Indicative Proposal is preliminary, indicative, incomplete and non-binding and is intended to represent an expression of interest. Paragraph 8 (“Nature of Indicative Proposal”) of the Consortium Proposal dated 18 October 2023 applies to the ARN Indicative Proposal with references to “this letter” and “Indicative Proposal” meaning “this announcement” and the “ARN Indicative Proposal” respectively. The ARN Indicative Proposal is also subject to receipt of applicable regulatory approvals.
2 Based on SCA net debt at completion being no more than the A$104m (excluding leases) reported at 30 June 2023.
3 Based on ARN’s undisturbed share price of A$0.855 on 17 October 2023 and illustratively valuing New SCA at 3.5x FY24PF EBITDA (pre-AASB16).
attractive and certain outcome to SCA shareholders at the earliest possible date, and to the extent the ARN Indicative Proposal is supported by the SCA Board, considers that a binding transaction could be entered into in coming weeks.
ARN looks forward to constructively engaging with SCA on the ARN Indicative Proposal. At this time, ARN shareholders do not need to take any action in relation to the ARN Indicative Proposal. ARN will keep the market informed in the event of any material developments.
ARN provides the following trading update.
April YTD total advertising revenues finished 1% ahead of the prior comparative period, delivering a consistent metro radio share, improved digital audio share, with revenues +40%, and regional revenues in-line with the prior comparative period.
May and June total bookings are pacing in-line with the prior comparative period.
Full year people and operating cost guidance of between 2%-4% provided in February is unchanged, and we remain on track to deliver ~A$6.5m of the A$10m two year cost out program in the year.
Cody Outdoor commenced operation of the HK Trams advertising contract at the start of May, and bookings for May and June are tracking in-line with internal expectations.
ARN Media Chairman, Hamish McLennan said : “The requirement to withdraw the Consortium Proposal should not deflect from the significant achievements ARN has delivered this year in a challenging market. We grew total revenue to the end of April, have accelerated our digital audio revenues, regional markets continue to perform strongly, and we are on track to deliver the permanent cost-out reduction target we set ourselves for 2024.
I firmly believe ARN is the most well-run audio business in Australia, and we are in a position of strength to progress the ARN Indicative Proposal for the benefit of both ARN and SCA shareholders. It would deliver a business of the scale necessary to compete against global platforms. Market restructuring has been talked about for a long time, but the fact remains that today’s regulatory environment is not reflective of the market in which Australian media operates and urgently needs government action”.
Southern Cross Media Group Limited (ASX: SXL) (SCA) notes the announcement from ARN Media Limited (ASX: A1N) (ARN) that the consortium comprising ARN and Anchorage Capital Partners Pty Limited (ACP) (Consortium) has withdrawn its proposal to acquire SCA.
SCA was only informed by ARN of its intention to withdraw its proposal on Saturday, 11 May 2024.
At considerable expense, SCA has engaged with the Consortium’s proposal for nearly seven months, during which time the Consortium has reconfirmed its proposal to SCA at least five times, most recently just seven business days ago. SCA is disappointed that the Consortium has now withdrawn its proposal.
SCA notes that ARN refers in its announcement to an intention to engage with SCA on an alternative indicative proposal involving SCA shareholders retaining the assets that would have been acquired by ACP under the Consortium’s proposal through a newly listed demerged entity, while transferring SCA’s digital audio assets to ARN. ACP would not be involved in ARN’s alternative proposal.
SCA will evaluate any formal proposal provided by ARN. However, SCA notes the following.
The potential for SCA shareholders to receive cash consideration (with the potential to benefit from a franked dividend) and reduce their exposure to regional television were key benefits of the previous proposal which would not be achieved by ARN’s alternative proposal.
Under ARN’s alternative proposal, SCA shareholders would be left holding an interest in two competing media businesses, one of which would have a market capitalisation of ~$100 million1, and as such potentially be sub-scale and less liquid compared to their existing investment in SCA.
ARN’s alternative proposal would reduce SCA shareholders’ exposure to digital audio from 100% in SCA today, to ~36% .
SCA highlighted to the Consortium the significant structural, technical, and other separation complexities - with resulting execution risk - that would be involved in delivering the Consortium’s original proposal. As of last week, several of these key issues remained unresolved by the Consortium. The complexity of the alternative proposal is materially greater given the additional need to demerge to SCA shareholders and list a new entity on ASX with the consequential regulatory and governance implications of this.
SCA continues to see strong momentum in its LiSTNR digital audio business, which is now generating positive EBITDA. In assessing any alternative proposal, SCA will expect the value to SCA shareholders to be optimised by maintaining appropriate exposure to the ongoing growth in digital audio.
SCA recommends shareholders take no action in relation to ARN’s proposed alternative proposal and will continue to update shareholders as required by its continuous disclosure obligations.
SCA Chair Heith Mackay-Cruise said:
“Over the past seven months, SCA’s management team and advisers have worked diligently and collaboratively with the Consortium to evaluate the Consortium’s proposal and to enable the Consortium to substantially complete its due diligence. This has required considerable cost and management effort by SCA. It is frustrating that the Consortium has now withdrawn its proposal in circumstances where any potential material concerns should have been identified much earlier in the process.
“I wish to acknowledge that the SCA management team has supported the due diligence process without losing focus on daily business activities. Broadcast advertising markets continue to be challenging, but SCA has grown its share of metro radio and digital audio markets during this year. In addition, our LiSTNR digital audio ecosystem delivered positive EBITDA for the first time in April and is on target to do so for the June quarter.
“We remain open to considering proposals that would deliver fair value and be in the best interests of all SCA shareholders.”
Basically the key to SCA proceeding with the ARN / ACP deal was the removal of the SCA tv licences.
ARN’s updated offer is clearly a last-minute proposal to keep discussions open. To the market, it’s virtually no different to to the ACP offer - 2 companies operating independently with the same mix of assets, with the excepting being that ARN would get 100% of LiSTNR. The change to ARN is that SCA shareholders get slightly more shares, so existing shareholders have their holdings diluted more, effectively means they pay more for the SCA stations.
To SCA shareholders, they get stuck with their investment in SCA. The ACP offer would have given them cash and freed them of their investment in TV. Now they get left with TV and get no cash. However with a slightly greater holding in ARN, they would have a more diversified media investment with 2 competing companies.
SCA make it sound like they now want the ACP proposal, which is amusing given how long they tried to reject it for.
I think there will be further revisions to ARN’s offer based on discussions with SCA. The asset mix currently proposed would have included considerations for what ACP wanted. SCA, if it were to go ahead, may have different priorities and want a different mix of assets. Some of that is likely to be easily negotiable with ARN, such as the mix of regional stations.
The change to ARN geting 100% of LiSTNR seems to be a sticking point for SCA. ARN were happy for ACP to get 50% of it, so there’s probably room to negotiate here. I’m guessing ARN changed that to 100% in their latest proposal to give them some room to negotiate with SCA. I think SCA can get them down to 50% pretty easily.
As for TV, I think the reality now is that SCA are stuck with that for the foreseeable future, especially if Ten Mildura remains off air. The Ten Mildura and greater Network Ten woes seem to paint a pretty bleak future for the Ten affiliates.
I could see a future where the company winds down and the radio stations are sold to another company. Sadly for the TV Assets however I can see a Ten Mildura situation happening. If SCA are left with the TV Assets which are becoming expensive to operate while simultaneously losing money, I can see them closing them down along with TDT and CDT.
In this scenario there would likely be just Seven and WIN in RQLD, RNSW and RVIC with WIN having a monopoly in areas like Tasmania. The biggest losers would be Spencer Gulf and Broken Hill, who would lose all commercial TV and would need to use VAST, where there would only be Imparja which is already in financial woes. In the next 5 years I expect to see the opposite of aggregation with many networks closing.
I don’t think the situation is quite that dire. The 10 affiliates are basically dead man walking, but 7 and 9 affiliates are still doing well enough. There’s still plenty of money to be made from 7 Tasmania. I imagine the Spencer Gulf/Broken Hill is doing ok with the monopoly and 7 Darwin and 7 Central are probably ok too given their popularity.
If SCA were to close up shop for their 10 affiliates, i think they could still find a buyer for those other stations mentioned. WIN would probably be interested in Spencer Gulf/Broken Hill since it would integrate well with their other SA and Griffith monopolies. 7 would almost certainly take 7 Tasmania, especially with the AFL expansion, and 7 Darwin and Central would compete their Australia wide coverage (expect for the monopoly markets).
The problem with 10 specifically is they have much lower ratings and are synonymous with not being popular, so advertisers don’t want a bar of them any more. That means their advertising rate per capita is less than 7 and 9, and their existing advertiser base is small which therefore makes it harder to do as well as they should from the few shows they do have which rate well. It’s a problem for 10 Metro also, but it’s exacerbated regionally where advertisers budgets are tighter.
I can’t see this new ARN proposal happening, yes it’s almost the same as the previous one, but it makes no sense for SCA to stay as a company with those holdings, shareholders will lose out & it’ll likely ultimately send them broke, this proposal is a huge win for ARN if it gets up but no one else, especially the industry at large & listeners/viewers.
The previous proposal had ACP taking pretty much what SCA would be left with, but I believe in their due diligence period, they had approached & probably came to some sort of investment strategy that after a period of time, they’d if they could sell what they had as a whole bundle, but most likely break it up & sell the radio assets to multiple smaller operators depending if they had current licences in locations or not, I believe ACP had talks with BOG, ACE, possibly a couple of others, & may have even been able to sell off the TV assets to someone at a reduced price but one that still made an economical investment positive, where as now the TV assets are likely worthless & ACP would’ve had to give them away, which Paramount may have taken on board if they got them for nothing, but that’s an big investment economic negative if ACP were to go ahead?
With SCA as a company keeping the small amount of radio assets & the TV with no digital audio assets, the company is more or less worthless & would probably end up being smaller in size & worth less than just about every other media/radio network in the country.
I was supportive of the first proposal as I thought it would be best for the industry & listeners/viewers, but I don’t support this proposal as I don’t think anyone bar ARN will benefit, as SCA will probably fail, & we’ll lose one regional TV network & have multiple regional radio stations also going dark.
At least I believe with the first proposal, the TV network would probably have been saved, but the radio would definitely still be there under smaller network owners/operators & possibly better programming, who knows, maybe Grants would’ve bought back into Regional radio expanding their network again buying up stations ACP were selling off, that won’t happen if SCA stays as a company & NEEDS to keep owning them/operating them.
Unfortunately I can see the same happening with SCA going into administration too if they don’t jettison the tv assets. If SCA Ten goes black we are talking TEN gone from the likes of Wollongong / Newcastle and Canberra. How much revenue would this cost 10? It may force Paramount to ditch 10 completely, leaving Australia with only four tv networks. 2, SBS , 7 & 9. This will probably happen anyway as TEN has been struggling even before streaming.
Something like this may force the Australian government to change the media laws to save the Tv and radio industry. The landscape has changed significantly since, with IPTV, Netflix, and music streaming taking significantly share away from the incumbents. Also some here calling the Australian radio industry terminal.
The two station per market rule needs to go to allow consolidation and mergers to occur.
This could leave five players in the Australian market for example Nova Entertainment merged with Nine, ARN merged with 7 / SCA / SRN / Capital Radio Network. SkY sports merged with SEN, the ABC and SBS, and the community radio. Sector. Basically a similar setup to NZ. It could benefit metro markets with more formats, but disadvantage regional markets with more networking where there is only two commercial stations.
The removal of network 10 programming from Mildura and the current failed SCA / ARN deal are big wake up calls for the industry. Will it force the government to review the current media laws?
I don’t think its quite that dire for radio, as there are operators like Breeze and Rebel that would be very happy to pick those markets up.
But it would require changes to local content quotas for that to be workable at some point in the future.
I 
agree. This needs to happen.
So, if I understand correctly, ARN plans to establish a ‘new’ SCA that mirrors the previous arrangement with ACP, hosting Pure Gold and Hit networks. Meanwhile, they aim to continue operating the ‘new’ ARN, featuring Triple M and KIIS. In essence, this setup would pit them against themselves, as they’ll be competing with their own programming. Did I get that right?
I don’t see the feasibility of such a proposal, time to let SCA sink further, unless ARN can find another partner.