The listed media business Southern Cross Media, home of SCA’s 99 radio stations, LiSTNR and broadcaster of 96 FTA signals across Australia, is expected to be the subject of a takeover bid by private equity investor Anchorage Capital.
A report in The Australian Financial Review indicates a non-binding offer is expected to be announced as early as Wednesday this week.
Update: ARN has revealed its bid.
Why ARN wants to acquire SCA and its plans for Hit and Triple M networks
The Nine-owned business daily reports ARN is working with the buyout fund in the bid for its rival radio network.
Anchorage Capital managing partner Beau Dixon is named as the “dealmaker” and the plan would be to “purchase a portfolio of assets and create a whole new independent radio player”.
What is in the deal for ARN?
It is not clear what could be in the deal for ARN. With two licences in most metro markets, ARN is not allowed by ownership law to have a controlling interest in more than two stations in each.
Anchorage might want ARN to handle the representation of the SCA media assets. But that would be a big pill to swallow. Competition law might step in and say sales and ownership of the radio licences should be kept separate.
In addition to selling commercial opportunities on 99 SCA licences, LiSTNR and 96 TV signals, SCA also provides national sales representation for 56 other radio stations and 39 TV stations.
What is in the deal for Anchorage?
Anchorage Capital currently has only a handful of investments. The company lists a portfolio of five businesses, two of them based in New Zealand. Its major investment is in retailer David Jones. Anchorage invested in the company in March this year when it became the operator of its network of 43 stores around Australia and New Zealand.
The private equity playbook sees investors looking for cost savings in the business it acquires before it restructures and then on-sells the asset a number of years later.
The Southern Cross Media SCA stations have undergone considerable cost-cutting over the past few years including networking of much of the regional programming across Australia.
It’s too early to know what sort of impact the arrival of Anchorage would have on staff numbers. It could put a freeze on contract negotiations and it would be expected staff numbers would be under the microscope.
It could also mean SCA’s ambitious play for re-signing Kyle and Jackie O would be abandoned. If that was the case, it could mean that ARN doesn’t have to match the huge offer SCA made to secure the two KIIS 106.5 breakfast stars for a new contract period.
Private Equity in Australia
In recent years private equity investment in Australian media has focussed on television assets. Both Seven and Nine had investments from private equity firms in the past two decades.
In 2006 a number of deals were revealed including a plan for Seven Group to sell half its television and magazine businesses to Kohlberg Kravis Roberts & Co (KKR).
That same year PBL Media, the corporate home of the Nine Network and the magazine publisher ACP, announced a deal with CVC. CVC Asia Pacific then paid $4.6 billion for 50% of PBL Media in February 2007. Later that year it paid another $524.9 million to move to 75%.
In more recent times, Quadrant Private Equity invested in the outdoor sector via QMS Media and Mercury Capital merged bargain basement acquisitions of Bauer Media and Pacific Magazines into Are Media.