Anchorage Capital weighs MediaWorks acquisition

Anchorage Capital Partners is weighing a move to double down on media assets in not just Australia, but also New Zealand.

Anchorage Capital Partners is believed to be weighing a purchase of New Zealand radio broadcaster and outdoor advertiser MediaWorks ahead of its attempted acquisition of Southern Cross Media Group assets.

MediaWorks is owned by Oaktree Capital Management and Sydney-based Quadrant Private Equity.

It comes after the Sydney-based private equity firm launched a $226m buyout proposal with Australian-listed KIIS FM owner ARN Media to acquire Southern Cross, which owns the Triple M and Hit radio stations, for 29.6c per share of cash from Anchorage and 0.753 ARN shares equalling 61.4c per share or $154m in total.

Following the proposal, Seven West Media raided ARN Media and amassed a 19.9 per cent holding, while Australian Community Media owner Antony Catalano put forward a merger proposal of his own for Southern Cross that was rejected.

Keybridge Capital, of which he is a director, won a Takeovers Panel application over a technical breach of the Corporations Act surrounding a sale of shares by Allan Gray to ARN ahead of the bid, which ARN Media is now appealing against, which could force ARN Media to reduce its holding.

Meanwhile, the Australian listed publisher of the New Zealand Herald and number one talkback radio station Newstalk ZB, NZME, has been weighing an acquisition of the MediaWorks’ outdoor advertising assets, as is rival Lumo.

Investment bank Goldman Sachs has been carrying out a strategic review of MediaWorks after its auditors flagged “material uncertainty” about its ability to continue as a going concern.

MediaWorks operates 12 New Zealand radio brands, including More FM and The Edge, along with 5500 outdoor touchpoints.

It is being hit by a weaker advertising market amid soft economic conditions, compounding the impact of structural industry change where tech giants like Meta and Google are taking more of the advertising dollars and encouraging industry consolidation.

Sydney-based Quadrant inherited a 40 per cent MediaWorks stake through its 2018 QMS purchase for $571.6m.

Oaktree, which owns the remainder, and Quadrant sold the loss-making MediaWorks television broadcasting division to US-based Discovery for $NZ20m in 2020, leaving the profitable radio unit remaining.

MediaWorks reported a $NZ125.9m loss for the year after sliding $NZ4.9m into the red in 2021, with lenders, including Westpac that are owed $NZ91.6m, waiving covenants.

Net assets are $NZ264.7m.

The company in 2021 was earmarked for a float through investment bank UBS and Jarden and numerous sale efforts have previously occurred.

Sky Network Television’s acquisition plan of MediaWorks last year collapsed after shareholders baulked at the move.

At that time, MediaWorks was understood to generate about $NZ40m of annual earnings before interest, tax, depreciation and amortisation, which assumed a deal would likely value the business at up to $NZ400m.

Ex Southern Cross Media Group boss Grant Blackley, had been interested in its radio assets.

Southern Cross is yet to respond to the ARN and Anchorage offer last month, which it describes as complex and would see it own a third of a combined media entity.

ARN Media made the bid after amassing a 14.8 per cent stake at $1.08 per share when shares were 72c, and at that time, it was worth 91c a share or 5.5 times EBITDA.

Anchorage is in the mix to take assets that ARN Media would need to offload to appease media regulators that forbid a broadcaster having more than two licences in one market.

Anchorage would have eight metro radio stations, 35 regional stations and the Southern Cross Media television business.

Should the deal proceed, ARN Media would gain the TripleM metropolitan radio network and cede three Gold stations to Anchorage.

ARN Media would acquire 51 stations and send 10 in the other direction, bringing it to a total of 88 stations, significantly bulking up the regional radio offering.