ARN Media forges ahead with potential takeover plans of Southern Cross Austereo

One of the biggest radio takeovers in Australian history is still on the table.

ARN Media chairman Hamish McLennan said the company has had strong interest in a potential takeover of Southern Cross Austereo. Picture: David Gray/AFP

ARN Media chairman Hamish McLennan says the media company has received “strong interest” from potential partners in a fresh takeover bid for Southern Cross Austereo.

Last week’s failed joint venture between ARN and Anchorage Capital Partners to take over SCA – after negotiations began in October – has left the door open for ARN to assess new opportunities the company has received in the past few days.

Speaking exclusively to The Australian, Mr McLennan, who has been ARN chairman since 2018, said the company had “better managers of their assets” and remained optimistic of putting another offer on the table.

“Since Anchorage pulled out primarily because of the (falling) SCA TV regional numbers, we’ve had some strong interest in partnering with ARN and we will assess those leads in the next few weeks,” he said.

“SCA were incredibly slow to appoint advisers at the beginning and formally engage with us but they were quick to rebuff us without actually (considering) a formal second proposal.

“SCA was slow to appoint advisers and they were challenging to deal with.”

ARN Media chairman Hamish McLennan. Picture: Tim Hunter.

News of a potential takeover spread on October 18 last year but SCA rejected claims the company was slow off the mark in appointing advisers and said it engaged UBS on October 27, the same day as its annual general meeting.

ARN held its AGM last Tuesday and it is understood executives at ARN and SCA were in further discussions last week despite both companies putting out statements to the ASX confirming that the latest negotiations had collapsed.

SCA chair Heith Mackay-Cruise — who took on the role in March after the sudden exit of Rob Murray – lashed out at the failed takeover last week and labelled the situation “frustrating.”

“It is frustrating that the consortium has now withdrawn its proposal in circumstances where any potential material concerns should have been identified much earlier in the process,” he said in a statement.

“We remain open to considering proposals that would deliver fair value and be in the best interests of all SCA shareholders.”

Southern Cross Austereo chair Heith Mackay-Cruise.

SCA has 99 radio stations including the Hit Network and Triple M stations, while ARN Media owns 58 radio stations including Gold and KIIS FM, home to one of the most popular radio programs in Australia, The Kyle And Jackie O Show, which extended its show into Melbourne in April .

Mr McLennan said ARN Media, which is led by chief executive officer and managing director Ciaran Davis, has “far superior management”.

“Look at how we’ve consistently been the No.1 network and we dominate Sydney and Melbourne through breakfast,” he said.

“I believe we deliver better content, better ratings and attract more money to the sector, and keep Australians employed while we pay local tax.”

ARN Media managing director and chief executive officer Ciaran Davis.

SCA has repeatedly said it remained open to future offers that “would deliver fair value and be in the best interests of all SCA shareholders”.

SCA recorded a 71 per cent fall in net profit in the six months to December to be $4.4m, compared to the same period in the 2022/23 financial year when it was $15.4m.

Its TV revenue plunged by 11.1 per cent to $53m in the six months to December 2023 and this remained a concern for Anchorage.

In a trading update for the four months to April 30, SCA noted its regional business continued to decline and year-to-date revenues were down by 10 per cent.

ARN Media’s annual results, released in February, showed its annual profit after tax for the calendar year 2023 dropped by 33 per cent to $32.3m.

SCA chief executive officer John Kelly, who began in the role in July last year, told The Australian the company’s “growth engine is digital audio”.

“We are in the fastest growing segment in media and we are the fastest growing player in that segment. As a combination it’s a very powerful growth engine for our business moving forward,” he said.

“LiSTNR (its streaming service) has been going for a little over three years and LiSTNR is now profitable.”

Southern Cross Media Group managing director and chief executive officer John Kelly.

Mr Kelly said the company had left the door open for potential takeover offers and the failed proposal by ARN was “not fair value”.

“The vast majority of our business in terms of an earnings’ perspective is audio related. Yes, we do have a regional TV with both Ten and Seven assets but those are both assets that we are trying to get the best return without spending any capital,” he said.

Asked if Mr Murray left SCA following frustrations with the takeover process, Mr Kelly would not comment.

ARN Media’s share price closed at 0.85c on Friday, while SCA’s share price closed at 0.86c.

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Originally published as ARN Media forges ahead with potential takeover plans of Southern Cross Austereo