Southern Cross Media Group is believed to be heavily engaged with Australian Community Media over the latter’s merger proposal, and there is market chatter that it will likely reach a decision as early as next week.
It comes after Southern Cross, the regional broadcaster behind the Triple M network, announced on May 28 that ACM had proposed for it to buy 14 of its daily print and digital news publications and its agriculture division.
Media industry participants and investors were initially understood to be sceptical about how seriously Southern Cross Media Group would take the offer after rebuffing an earlier proposal from ACM in November, saying that owning print assets was not consistent with its strategy.
ACM is run by Domain Group founder Antony Catalano and is backed by Alex Waislitz’s Thorney Investment Group and their ownership interest in Southern Cross is 14.5 per cent.
However, the understanding is that Southern Cross Media Group is heavily engaged, gaining comfort with cost synergies and working through revenue synergies.
One of the challenges to overcome will be the Southern Cross share price, which has fallen to almost 64c from 82c in the past month, taking its market value to $150m.
Possible reasons for the selloff are that shareholders have disengaged after merger talks with ARN Media collapsed; there is unease about an ACM tie-up; or investors are offloading positions ahead of the financial year end on June 30.
ACM is pitching its business as one with high audience engagement with 4 million viewers across digital and print.
It has 150,000 digital subscriptions, recurring annual revenue of $23m with the opportunity to almost double that should the business hit its target of 250,000 subscribers.
It has also promoted the merits of the strong earnings from its agriculture publication The Land and its transformation to the digital world.
When Mr Catalano and Mr Waislitz purchased ACM in 2019 for $125m or $115m excluding debt from what was then Fairfax (now owned by Nine), it had nine print manufacturing sites with 374 workers.
It now has two print presses with 26 workers, and after executing its plans to shut one down, it will have just 13 print manufacturing employees.
A merger with Southern Cross could enable ACM to hit its audience target earlier.
Southern Cross said on May 28 that it would investigate to determine whether it would align with its strategy, “particularly in relation to prospective value in ACM’s digital capabilities … and other potential synergies”.
It comes as the media sector gets impacted by a weak advertising market, creating more incentive for traditional media operators to consolidate to achieve cost savings.
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