Kerry Stokes said to have blocked Southern Cross/ARN Media deal

Seven West Media chairman Kerry Stokes.

Former Seven West Media management lobbied the board of the broadcaster to buy Southern Cross Media Group and ARN Media with its own shares but was blocked on embarking on the move by billionaire chairman Kerry Stokes, sources say.

The understanding is that by acquiring ARN Media and/or Southern Cross, which was up for discussion within the headquarters of Seven West before both ARN Media and Southern Cross were in talks for a merger themselves, would dilute the size of Seven Group Holdings’s 40 per cent position in Seven West.

Seven Group is 57 per cent owned by Mr Stokes, and he did not want to dilute his interest in the free-to-air broadcaster and streaming service provider that also owns the West Australian newspaper.

Some are taking the decision by Mr Stokes as a signal that he is committed to the media company for the long term, despite it suffering from a weaker advertising market and poor share price performance and years of speculation that he may be a seller.

In terms of the Southern Cross regional television business that it owns, it is believed that Seven West would be interested in buying its television signals in the South Australian, central NSW and Tasmanian markets.

When the television business of Southern Cross was previously on the market, the company wanted three times earnings.

Former chief executive at Southern Cross Grant Blackley was understood to be prepared to sell the television operation many years ago, but his board rejected the plan, according to the talk in the market, with the deal substantially lessening the size of Southern Cross, which owns the Hit and Triple M radio station network.

It comes amid current chatter that Southern Cross is in talks with the Paramount Global-owned Network Ten to offload its television arm, which may smooth the way for a revived ARN Media deal.

Merger talks were afoot between Southern Cross Media and radio broadcaster ARN Media earlier this year, when the latter partnered with Anchorage Capital Partners to buy Southern Cross Media.

The private equity firm Anchorage was in the frame to take the assets that ARN Media could not own under Australian media laws. But after carrying out due diligence, Anchorage withdrew from the deal, with concerns surrounding the sharp decline in free-to-air advertising revenue considered to be one of the key reasons.

Southern Cross Media had placed the television operation that broadcasts the content of other networks up for sale in 2022, but received no conforming offers other than an offer for parts of the business from Seven West.

Southern Cross Media has an affiliation agreement with Network Ten to broadcast its content.

Latest numbers show the regional television unit generated $9.8m in earnings before interest, tax, depreciation and amortisation for the six months to December 2023, down 31.2 per cent.

There was a view earlier that Ten could buy the television unit, but complicating matters had been that its parent company, Paramount, has been for sale.