ARN Media raids Southern Cross Media, Jefferies on board

ARN Media’s KIIS FM breakfast hosts Jackie O and Kyle Sandilands.

ARN Media snapped up 14.8 per cent in its major rival – Triple M radio station owner Southern Cross Media Group – on Monday night.

The company, previously known as Here, There and Everywhere or HT&E, had investment bank Jefferies making efforts to buy the shares, as first revealed online by DataRoom.

They closed at 76c, with Southern Cross Media’s market value at $182m.

A term sheet sent to investors said shares were being sought at $1.08 each, a 42.1 per cent premium to the last Southern Cross share price of 76c and a 42.5 per cent premium to its average trading price over 5 days.

ARN Media was looking to buy up to 14.8 per cent, which it had secured before the bid deadline of 7pm.

ARN Media does not currently have an economic interest in Southern Cross Media Group.

An acquisition of a position over 15 per cent requires future approval of the Australian Communications and Media Authority.

The purchase comes after the Southern Cross Media’s chief executive Grant Blackley announced his departure last month after eight years, and is to be replaced by the company’s chief operating officer John Kelly from July 1.

Latest financial results showed the company – which owns radio stations including Triple M and the Hit – recorded a net profit of $16.8m for the six months through December 31, down 48.3 per cent compared to the same period a year ago.

Revenue remained stable at $259.7m.

Its share price has also been hit hard, nearly halving in the past year from $1.68, with industry experts saying that the media group has suffered from falling revenue after losing its affiliation agreement with Nine Entertainment, instead partnering with the Ten Network on its regional television operations.

Costs have also increased as the broader media sector faces tougher conditions with a weakening economy and rising interest rates.

Expectations have mounted for some time that consolidation would occur among traditional media companies, although the thinking is that the latest raid is unlikely to result in any immediate buyout.

ARN Media previously purchased a stake of just over 4 per cent in oOh! Media before selling, pocketing a profit of about $30m so the deal could be nothing more than an investment.

Yet there has been talk about a tie-up with Southern Cross in the past as ARN Media remained open about being keen to embark on acquisitions.

There have also been suggestions about a tie-up between Seven West Media and ARN Media or Southern Cross.

Radio broadcaster ARN Media owns KIIS and The Edge radio stations through the Australian Radio Network and competes fiercely with Southern Cross for talent.

It prospered by acquiring top radio talent Kyle and Jackie O, but contracts are understood to be up in 2025.

One suggestion was that the raid was strategic, where it may prevent an acquisition from another suitor, or it may enable the group to benefit should Southern Cross poach the star radio duo.

Ratings for ARN Media were soaring last year and it is almost debt free after selling the 25 per cent stake it owns in mobile messaging business Soprano Design, using the $66m in proceeds to pay down loans.

Southern Cross has previously considered a sale of its regional television business, but took the unit off the market when bids did not come in at the right value.

The Australian listed media company reaches more than 95 per cent of the Australian population through its radio, television, and digital assets.

Under the Triple M and Hit network brands, Southern Cross Media owns 99 stations and provides national sales representation for 34 regional radio stations.

It also broadcasts 93 free-to-air TV signals across regional Australia, reaching 2.7 million people a week.

It counts opportunistic fund manager Allan Gray Australia as its 22 per cent shareholder, and it is understood that the fund manager has sold down some of his stake in the business.