Spotlight on Antony Catalano in Southern Cross Media contest

Antony Catalano could make a move on Southern Cross Media. Picture: David Geraghty

Speculation is mounting that media entrepreneur Antony Catalano could be angling to interrupt ARN Media’s $200m-plus plans to buy Southern Cross Media Group, with some suggesting a full cash offer would be enough to win over minority investors.

Yet institutional fund manager Allan Gray remains the king maker, with its 22 per cent stake in the stock and also a holding of a similar size in ARN Media.

Allan Gray’s managing director Simon Mawhinney is known to be of the view that consolidation between the two groups makes sense and could result in significant earnings upside.

To accept a cash offer for his holding, it would need to be highly attractive to beat the potential of an ARN Media deal, particularly when franking credits are taken into account.

Allan Gray is known to have been approached for a purchase of its stake in Southern Cross Media Group some time ago, but is not thought to have had any recent approaches.

Any move by Mr Catalano and his wealthy backer Alex Waislitz to upset the plans would follow their raid on Prime Media Group in 2019 when Anchorage Capital Partners and Seven West Media bid for it.

Mr Catalano and Mr Waislitz purchased regional print media business Australian Community Media in 2019 from Nine Entertainment for a price believed to be about $120m, outbidding rival suitor Anchorage Capital Partners, and the thinking is Mr Catalano needs an exit plan for his investment, which may be easier if he consolidates in a market that is facing structural decline and disruption from technology giants.

The understanding is that some institutional shareholders in Southern Cross are keen for an exit from the sector and would be interested in a cash offer so they can move on.

Mr Catalano and Mr Waislitz went on to start digital media and technology services business View Media last year, which aggregates property technology assets to create a property ecosystem, and owns 72 per cent of real estate search business realestateview.com.au and other investments in data and artificial intelligence businesses.

Among its shareholders are the Kerry Stokes-backed Seven West Media and ANZ has invested $50m into the business.

Mr Catalano is known to have had aspirations to buy Southern Cross to broaden out his regional media unit.

Analysts at Canaccord say ARN’s deal remakes the company as one that is larger, more profitable and with a better growth outlook.

Southern Cross, which owns the Triple M and Hit radio stations, is yet to respond to the proposal that landed from ARN last week, which earlier raided its register amassing a 14.8 per cent stake at $1.08 per share when shares were 72c.

Analysts say that the offer worth 91c a share equals 5.5 times earnings before interest, tax, depreciation and amortisation.

It includes 29.6c per share of cash from private equity firm Anchorage Capital Partners (ACP) and 0.753 ARN shares equalling 61.4 cents per share or 154m in total.

It would result in Southern Cross shareholders owning around one third of the combined entity.

ACP is in the mix to take assets that ARN Media would need to offload to appease media regulators, which forbid a broadcaster having two or more licences in one market.

ACP would have eight metro radio stations, 35 regional stations and the Southern Cross Media television business.

Should the deal proceed, ARN Media would gain the TripleM metropolitan radio network and cede three Gold stations to ACP, which could add 1 per cent to its share of radio audiences, and give up three Gold stations to ACP.

ARN Media would acquire 51 stations and send 10 in the other direction, bringing it to a total of 88 stations, significantly bulking up the regional radio offering.

Canaccord believes the deal could add nearly $30m in EBITDA for its $165m investment or higher with a restructuring of costs and shedding of lease liabilities.

Shareholders have hopes a merger will take the digital audio venture LiSTNR of Southern Cross and iHeart Radio of ARN Media from loss making to break even position.

Grant Samuel and Corrs are working with Southern Cross, while the suitors are working with Jefferies.

When the offer was announced, it was worth 94c a share, a 29 per cent premium to its last closing price at 85.5c a share.

Elsewhere, DataRoom has learned that the bidder for Sky Network Television is private equity out of the United States, although it’s not groups that looked to recapitalise the business last year, including Apollo Global Management or Atairos, nor is it Silver Lake.

But apparently, it’s a small US-based private equity firm with a focus on media assets.