Quadrant Private Equity takes out QMS Media, on front foot to acquire MediaWorks

Quadrant is best placed to acquire MediaWorks of New Zealand. Picture: iStock

Quadrant Private Equity’s decision to pay $571.6m for the outdoor advertising company QMS Media has some wondering what is next for the Australian-based buyout fund.

QMS owns 40 per cent of the New Zealand radio and free-to-air television broadcaster MediaWorks, which has recently placed its loss making television station up for sale through investment bank UBS.

By acquiring QMS, Quadrant is on the front foot to take out MediaWorks, which some believe the private equity firm will carve up and sell off assets to Nine Entertainment, which is said to have made approaches to buy MediaWorks assets in the recent past.

After divesting its New Zealand assets to Nine, and shutting down or separately selling off the television arm, it could leave Quadrant with another Australian outdoor advertiser and the hope is that it repeats its earlier success with APN Outdoor.

It is expected that well-regarded media executive Andrew Hines, the Australian chief operating officer of JCDecaux, could be recruited. He was recently spotted having meetings with Quadrant boss Chris Hadley.

While the television division, which includes channels such as TV3 and Bravo, are not seen as attractive in their own right, the real estate on which the network sits, which some estimate to be worth about $25m, could be the drawcard for a buyout fund.

The latest QMS deal has created a level of curiosity among others in the Australian private equity industry and divided opinion as to whether the deal will be a good one for Quadrant.

This is after its rivals have run the ruler over QMS in the past and opted to walk away.

Some believe that Quadrant is paying too much for the business, while others say it is not enough. Larger funds such as KKR are also said to be interested, with the potential of a rival offer emerging.

The media industry is seen as tough going for private equity firms, hungry for large returns.

With distressed funds being the exception, many are sidestepping the media sector that is facing challenges with digital disruption, particularly free-to-air broadcasters.

Quadrant has previously built a reputation for lucrative exits on its investments and has traditionally targeted founder-owned companies for acquisitions, so it will be interesting to see if its dream run continues. Lately, it has wrestled with claims its Rockpool Dining Group has underpaid staff and has made early efforts to place its gyms business on the market without finding a buyer at the right price.

Meanwhile, a private equity buyout of QMS is likely to be bad news for groups such as Southern Cross Media, which had high hopes to buy the Mediaworks radio operations as part of a move to become a regional player in the audio space.

Other rivals such as oOh! Media could compete for QMS. And a left of field possibility could be media mogul Cameron O’Reilly, as KKR and possibly others like CPE Capital are believed to be considering a rival bid.

During the Tim Worner era, Seven West Media made approaches to MediaWorks, as did its soon-to-be-acquired Prime Media. But a recent profit downgrade is likely to have hampered plans for Southern Cross to get out its cheque book.

Last year, APN Outdoor was understood to have made a bid for QMS before APN itself was purchased by JCDecaux.