ARN Media ditches Southern Cross tie-up to focus on Hong Kong interest

ARN Media is believed to have moved on from a Southern Cross tie-up. Picture: iStock

ARN Media is believed to have moved on from a tie-up with Southern Cross and will instead focus on increasing earnings in its Hong Kong-based outdoor advertising business.

The understanding is that after approaches were made to ARN by Australian Community Media about a tie-up to buy rival Southern Cross, ARN opted to move on.

ARN, the radio broadcaster that controls the KIIS and Gold network, last year put forward a merger proposal to Southern Cross with partner Anchorage Capital Partners that was initially rejected.

After sweetening the offer, by about $25m to almost $250m, offering 0.87 ARN shares for every Southern Cross share as well as 29.6c cash paid by Anchorage, the pair were granted due diligence access.

However, Anchorage Capital Partners pulled out over concerns about the performance of its regional television operation, leaving ARN searching for another group keen to take its place.

ARN produced a $5.4m net profit for the six months to June 30 compared to $52.5m for the previous corresponding period, and at its presentation last month showed its Cody outdoor advertising business in Hong Kong needed $12m-$15m for a working capital rebuild for the half.

Shares fell after delivering its results and its market value is now about $182m and its share price 59c.

Meanwhile, Southern Cross has placed its television business up for sale for a second time, and it is understood a deal is close, where Seven West Media buys the broadcasting rights in Tasmania and central NSW and Network Ten takes the remainder, including the $50m-odd long-term BAI contractual obligation for outsourced television broadcast transmission.

The synergies bringing ARN Media and Southern Cross Media Group, which has the Hit and Triple M networks, together are considered to be substantial, particularly with their digital audio networks Listnr and iHeartRadio, but they need a third party to be involved, as media laws prohibits more than two licences in the market.

For the year to June, Southern Cross reported a 1 per cent fall in annual revenue to $499.4m and a $224.6m loss.

DataRoom reported on July 24 that the broadcaster may be about to sell its television unit to the Paramount Global-owned Network Ten as the free-to-air broadcasting industry faces lower audience numbers and weaker advertising revenue.

For the year to June 30, the Southern Cross television unit generated $97.5m of revenue and $13.3m of earnings before interest, tax, depreciation and amortisation, down 28.9 per cent from the previous corresponding period.

Expectations are that it may receive a sale price for the assets of between $20m and $30m at best.

There are also questions whether ACM, owned by Antony Catalano and Alex Waislitz, does a deal surrounding Southern Cross Media Group.

They also own 14.2 per cent of Southern Cross.

Working with Southern Cross has been investment bank UBS, and ARN Media is advised by Jefferies.