Quadrant Private Equity’s move to take control of New Zealand broadcaster Mediaworks from Oaktree Capital Management may have implications for its Australian industry peers like Nine Entertainment.
Mediaworks owns 11 New Zealand radio brands, including More FM and The Edge, along with 5500 outdoor touchpoints.
Quadrant had exposure to the radio and audio group through its investment in outdoor advertising company QMS which owned about 40 per cent of the Mediaworks.
Quadrant privatised QMS - now making about $120m of annual earnings before interest, tax, depreciation and amortisation - from the ASX in 2018 for $571.6m.
Mediaworks has hit rough waters, clocking up major losses in the past two years amid a weak economy and slow advertising market.
Quadrant recently tipped more equity into the business to ensure its survival, and as a result, DataRoom reported at the time that the deal took its ownership interest to about 55 per cent.
Sydney-based Quadrant revealed this week it was buying out Oaktree of Mediaworks completely in a deal understood to be worth somewhere between $NZ10m and $NZ100m.
While there’s serious doubts about the health of the business, private equity insiders insist Mediaworks is spitting off a lot of cash, and full ownership will significantly enhance the overall trans-Tasman outdoor advertising business.
Other media sources close to the situation say that it was a tidying up exercise, what with Oaktree no longer a motiviated owner of the business, so now Quadrant can execute on its plan to improve the business without any complication.
Where Nine Entertainment comes in, is following a deal set to be agreed where Domain Holdings gets bought out by CoStar for $2.8bn, Nine would gain about $1.4bn in proceeds after tax from the sale as a 60 per cent shareholder.
Nine, an Australian free-to-air broadcaster, streaming service provider and publisher of titles like the Australian Financial Review, The Sydney Morning Herald and The Age, has been urged by shareholders to return the money.
But, there’s been chatter in the market Nine had been putting its feelers out for new acquisition targets.
One of them was said to be QMS, although sources close to Nine have suggested it would not be a buyer of the business, while the other was Australian-listed radio broadcaster Southern Cross Media Group.
Should Nine have been keen on QMS, now it becomes more of a significant strategic decision for the media group’s directors and management, because when the company merged with Fairfax Media, it made the strategic decision to exit the New Zealand market and sell its publishing business across the Tasman, which includes website Stuff.
Yet there’s now new management and a new board at Nine, which may be fine about getting back into the New Zealand market, considered to be about the size of Brisbane.
Still, it may all be a moot point anyway, based on the continuing fall of Domain’s share price, which may imply the market is betting the deal with CoStar is off.
The market more broadly has come off 20 per cent since the terms of the deal were agreed, and potentially adding to the concern is CoStar’s activist investors Third Point and D.E. Shore have been pushing for change.
Overnight, CoStar’s shares rallied 4 per cent when it told the market it had formed a capital allocation committee and would review targets for expansion.
With an agreement still to be signed, CoStar can walk away from Domain without paying a break fee and perhaps come back in about six months and bid again at a lower price when the stock is possibly far cheaper.
CoStar has expanded from commercial property online ads to the residential market in the US and UK with sites homes.com and OnTheMarket, but despite heavy investment has not had the gains it hoped for.
It’s understood the activists remain keen on the Domain deal as an entry into the Australian market, but perhaps not at the current price, and want the group to rein in spending in the UK market.
According to accounts lodged with the New Zealand companies office, Mediaworks made a $NZ107m loss after tax in 2023 and $NZ125.9m loss in 2022 as it shut a radio station and lenders waived its debt covenants.
In 2023, it had $NZ119m of borrowings.
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