Southern Cross hopes result bolsters suitor ARN Media’s offer

Free-to-air TV broadcasters are struggling to hold audience numbers and advertisers.

The media sector is under close watch this week as broadcaster and takeover target Southern Cross Media Group delivers its half-year result on Thursday, and moves by global giants create ripples across Asia Pacific operations.

The understanding is that Southern Cross, which broadcasts television in the regions and radio through the Triple M and Hit radio networks, hopes to prove why it is worth more than what ARN Media is offering in its cash and scrip bid – although it will stop short of rejecting its offer.

The Jefferies-advised ARN Media and Anchorage Capital Partners last year had offered about $239m for regional radio and television broadcaster Southern Cross, in what was a highly complex deal that involves the swapping of assets between ARN Media and ACP to appease regulators.

The parties are still in due diligence on each other, but holding up the negotiations is the provision of information being requested by Southern Cross about its rival’s digital business. That’s important because its own shareholders will be partly paid in ARN Media shares.

The results will land after industry watchers would have had time to digest results from Paramont Global in the United States overnight – which could provide some insight into the future of the Australian free-to-air broadcaster Network Ten, which has always faced challenges competing against larger rivals locally.

It’s a tense time in the sector, with free-to-air broadcasters struggling to hold audience numbers and advertisers, as is evident with the results of Ten’s larger competitors, Seven West Media and Nine Entertainment.

Seven West reported a 52.6 per cent plunge in half-year net profit to $54m due to the decline in the TV advertising market, while Nine’s broadcast revenue for the first half fell 9 per cent for a similar reason.

Warner Brothers Discovery sent shockwaves across the Tasman by announcing the closure on Wednesday of its local free-to-air news and television operations in a move expected to cost 200 jobs.

Discovery bought the New Zealand television business that owns free-to-air channel Three from US private equity firm Oaktree, and over time the free-to-air broadcaster has struggled to be profitable as it competes with the state-owned enterprise TVNZ.

The thinking had always been that the strategy for its US owners would be to strip out costs and funnel its own content into network, although Wednesday’s announcement still came as a major surprise.

The Wall Street Journal has reported that Paramount Global – the company that includes TV, movies, and streaming – has seen its stock lose more than 50 per cent of its value in the past year, amid a tougher economic backdrop.

Its owners have been exploring a sale, which could have major ramifications for Ten should a buyer opt to exit the business that CBS – which is owned by Paramont – bought out of administration.

Warner Bros. Discovery posted lower fourth-quarter revenue, dragged down by lagging results in studios and cable networks.

The stock has fallen nearly 40 per cent over the past 12 months, the Wall Street Journal has reported, so it’s no wonder it is looking at cost-cutting opportunities.

Revenue in the networks unit fell 9 per cent, dragged down by cord cutting and advertising softness.

Warner Brothers reported a loss of $US400m.