Southern Cross Media Group could have changed tack with respect to corporate activity, as chatter emerges in the market it may be about to sell its television unit to the Paramount Global-owned Network Ten.
Merger talks were afoot between Southern Cross Media and radio broadcaster ARN Media earlier this year.
ARN Media partnered with Anchorage Capital Partners to buy Southern Cross Media, with the private equity firm Anchorage in the frame to take the assets that ARN Media could not own under the Australian media laws.
But after carrying out due diligence, Anchorage withdrew from the deal, with concerns surrounding the sharp decline in free-to-air advertising revenue considered to be one of the key reasons why.
Southern Cross Media had placed the television operation that broadcasts the content of other networks up for sale in 2022, but received no conforming offers.
Southern Cross Media has an affiliation agreement with Network Ten to broadcast its content.
When Anchorage first bid for Southern Cross Media in October with ARN, the forecast for regional television revenue decline was in the single digits – since then it has moved to be in the double digits.
Market watchers expect any deal struck would be at a nominal sum.
Latest numbers show the regional television unit generated $9.8m in earnings before interest, tax, depreciation and amortisation for the six months to December 2023, down 31.2 per cent.
Sources say the company previously wanted a price about three times the division’s EBITDA.
As well as the future earnings outlook, the long-term contractual obligation for outsourced television broadcast transmission was also a deterrent for Anchorage.
There was a view earlier that Ten could buy the television unit, but complicating matters had been that its parent company, Paramount, has been for sale.
The Wall Street Journal reported this month that Paramount Global has agreed to a merger deal with David Ellison’s Skydance Media, which would spend more than $US8bn on the transaction, and Shari Redstone would sell her family’s controlling stake.
Paramount owns the iconic movie studio behind “The Godfather,” broadcaster CBS and cable networks including Nickelodeon, Comedy Central and MTV.
Skydance, a production company run by the son of Oracle co-founder Larry Ellison, owns an animation studio and a gaming division, and has a joint venture with the National Football League.
Ten has already cut some key shows from its line up, and the end of some joint venture arrangements means it can no longer be viewed in some key markets.
Paramount may feel forced to move with threats Southern Cross Media will cut its affiliation agreement with a major metropolitan broadcaster all together.
Antony Catalano, the Australian Community Media proprietor, with his wealthy backer Alex Waislitz, have a 14.2 per cent holding in Southern Cross Media and may bid for Southern Cross Media.
However, they first may lift their stake to gain greater influence over the outcome of any deal.
Southern Cross Media has 99 radio stations including the Hit Network and Triple M stations and ARN Media owns 58 radio stations including KIIS FM – home to ratings juggernaut The Kyle And Jackie O Show, which recently expanded to Melbourne – and Gold.
The original buyout proposal by ARN Media involved it acquiring 51 stations and send 10 in the other direction to be owned by Anchorage, bringing it to a total of 88 stations, significantly bulking up the regional radio offering.
It would also own the Southern Cross Media digital audio assets.
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