Seven West Media raids ARN Media share register

Seven West Media purchased 14.9 per cent on market of the radio broadcaster that has the KIIS and Pure Gold stations, and a further 5 per cent cash settled equity swap through Barrenjoey at the weekend.

Seven West Media has created a major upset in the battle for Southern Cross Media Group by raiding the register of its suitor, ARN Media, getting its hands on 19.9 per cent of the stock.

The Kerry Stokes-backed television broadcaster purchased 14.9 per cent on market of the radio broadcaster that has the KIIS and Pure Gold stations, and a further 5 per cent cash settled equity swap through Barrenjoey at the weekend.

Shares were purchased at $1.10 each, a 29 per cent premium to Friday’s closing price.

It comes as both ARN Media and Antony Catalano’s Australian Community Media do battle to gain control of regional television and radio broadcaster Southern Cross, at a time many believe consolidation is needed in the traditional media industry, which is facing economic headwinds with weaker advertising and structural change.

It is understood the plan for Seven West is not to make a bid, but rather keep its options open for the future.

Seven West and ARN Media, which counts NewsCorp, publisher of The Australian, as a 13.36 per cent shareholder, have held merger talks in the past.

DataRoom reported in September that it could take part in consolidation of the industry, which could involve Southern Cross.

Seven West boss James Warburton has locked horns in the past with Mr Catalano when, with his wealthy backer Alex Waislitz, Mr Catalano raided Prime Media Group when Anchorage Capital Partners and Seven West Media had also bid for the business.

Southern Cross Media Group, which is advised by UBS, is evaluating an offer from ARN Media and Anchorage Capital Partners, which was received on October 18 valued at

91c per share, including 29.6c per share of cash from private equity firm Anchorage Capital Partners (ACP) and 0.753 ARN shares.

But on Friday, Mr Catalano’s ACM launched a merger proposal for Southern Cross, where he would vend in his regional newspaper assets in exchange for 20 per cent of the overall company, in a move he believes would boost Southern Cross Media Group’s annual earnings by 50 per cent to $120m.

The argument of the former chief executive and founder of the online real estate company Domain Group is believed to be that by merging ACM, which includes titles such as The Canberra Times and the Illawarra Mercury, the move could create an uplift in earnings to the business of more than 50 per cent to its current $77.2m of annual earnings before interest, tax, depreciation and amortisation, taking total annual EBITDA to $120m.

The deal would see Mr Catalano vend all of his regional and community newspaper titles into the business, with the exception being the agriculture publishing division, including its title The Land.

The Nick Bolton-led Keybridge Capital, of which Mr Catalano is a director, has also applied to the Takeovers Panel on the grounds that ARN Media’s move to buy 14.8 per cent of Southern Cross in June ahead of its buyout needed to be accompanied by a takeover bid under takeover laws.

Mr Catalano purchased ACM from Nine Entertainment in 2019 for a price believed to be about $120m.

Since that time, he has built the company’s digital capabilities with 130,000 annual digital subscribers and more than $20m in digital revenue from 90 websites with an overall audience of 6.6m.

Institutional fund manager Allan Gray remains the kingmaker, with its 22 per cent stake in the stock and also a holding of a similar size in ARN Media, and is known to be of the view that consolidation makes sense between the two camps.