ARN Media and Anchorage Capital have revealed their takeover bid for SCA and detailed their plan for the Hit and Triple M radio networks.
Here are the highlights of the ARN Media release:
ARN Media and Anchorage Capital have today made a non-binding indicative offer to acquire 100% of the fully diluted share capital of Southern Cross Media.
Under the Indicative Proposal, SCA shareholders would receive 0.753 ARN shares and 29.6 cents cash per SCA share. Based on the last closing price of ARN shares (A$0.855 on 17 October 2023), this implies a total value of A$0.940 per SCA share before taking into account the benefit of any franking credits distributed in connection with the Proposed Transaction.
The Consortium believes that the Indicative Proposal will provide SCA shareholders with a number of important benefits, including the opportunity to:
• Realise an attractive premium of 29% to the last closing price of SCA shares and 28% relative to the SCA 30 day VWAP
• Through an ongoing shareholding in ARN, participate in the material value creation opportunity arising from the combination of certain ARN and SCA radio and digital audio assets
• Receive significant cash consideration in excess of current trading value, providing near and certain value that should also enable access to franking credits of 12.7 cents per share for eligible SCA shareholders if the cash component of the Indicative Proposal Price is structured as a pre-completion fully franked special dividend
• Benefit from enhanced scale and register diversity as ARN shareholders post-transaction and
• Access a more flexible balance sheet relative to SCA with reduced pro forma leverage (less
than 0.8x) at ARN post-transaction, which will support a continued ability to invest and grow.2
As part of the Proposed Transaction, it is intended for the radio and television assets of ARN and SCA to be separated into independent ownership by each of ARN and ACP (the “Separation”), subject to all necessary regulatory approvals.
The Proposed Transaction and Separation will result in two separate, national media organisations that will compete independently of each other on metro and regional radio, and more broadly. By structuring the Proposed Transaction and Separation in the manner set out in the Indicative Proposal, the Consortium is confident of delivering transaction certainty to SCA, its shareholders, and other key stakeholders.
For both ARN and SCA shareholders, the Proposed Transaction and Separation will create:
• 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 of these locations and with differentiated, nationally and locally relevant talent
• 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, delivering a more compelling regional network for advertisers and communities
• The opportunity to benefit from cost and other efficiencies resulting from the combination of retained and acquired radio stations, under the management of ARN’s well-regarded and cost focussed management team
• Enhanced future growth potential and an accelerated path to profitability through a proposed digital audio joint venture of greater scale, allowing ARN to compete more effectively with global digital platforms.
In addition, the Proposed Transaction is expected to deliver at least double digit pro forma earnings accretion for existing ARN shareholders in the year of acquisition.
ARN Media Chairman, Hamish McLennan said: “The Board has carefully considered numerous strategic options to continue the company’s growth and believe this transaction would be transformative for both sets of shareholders. ARN’s regional radio footprint would be almost doubled while we would maintain a focused metro radio network, underpinned by the recognised KIIS and Triple M brands in metro areas. The increased scale supports the potential for future index inclusion and liquidity once the transaction is complete.”
ARN CEO and Managing Director Ciaran Davis (pictured above) said: “There is a significant value creation opportunity bringing together certain ARN and SCA radio and digital audio assets. ARN is ideally positioned to support and operate an expanded regional radio network and as a combined group of scale in digital audio, positioned to compete efficiently and effectively with international competitors.”
The Consortium looks forward to engaging further with SCA to develop the Indicative Proposal.
This announcement should be read in conjunction with the Indicative Proposal. The Indicative Proposal is subject to a number of conditions, including due diligence and regulatory approvals. No agreement with SCA has been reached at this time and there is no certainty that a transaction will eventuate. The Indicative Proposal (and this announcement) is preliminary, incomplete and non-binding and does not constitute a commitment or undertaking by the Consortium to proceed with the Proposed Transaction.
The Consortium has appointed Jefferies Australia as financial advisor and Gilbert + Tobin as legal advisor in relation to the Indicative Proposal.
At this time, ARN shareholders do not need to take any action in relation to the Indicative Proposal. ARN will keep the market informed in the event of any material developments.