ARN Media acquires 14.8% stake in rival Southern Cross Media

Radio broadcaster ARN Media (ASX: A1N) has shelled out $38.3 million to acquire a 14.8% interest in its rival Southern Cross Media (ASX: SXL).

The company made an after-market raid offer on Monday of $1.08 per share, representing a 42.1% premium to Southern Cross Media’s last traded price of $0.76.

The raid was structured as a fixed-price bookbuild, with Jefferies Financial Group opening the books after hours with an aim to have the equity stock secured by the 7pm bid deadline.

The stake is believed to be a strategic equity investment which represents “attractive value” for ARN shareholders.

Broadcasting licence rules

Under the rules of the Broadcasting Services Act 1992, Southern Cross and ARN control the maximum permitted two commercial radio broadcasting licences in all metropolitan markets and several regional markets.

The Act prohibits ARN from holding an interest of more than 15% in Southern Cross as it would be considered a third commercial radio and television broadcasting licence.

An acquisition of more than 15% requires approval from the Australian Communications and Media Authority and ARN is expected to release ASIC Form 603 “Notice of initial substantial holder” in due course.

Leading media company

As one of Australia’s leading media companies, Southern Cross is home to LiSTNR, the Hit and Triple M networks and regional television stations.

Its broadcast channels reach more than 95% of the Australian population.

ARN Media (which changed its name from HT&E in May) owns 58 radio stations across 33 markets including KIIS FM, CADA and the Pure Gold network, as well as digital entertainment platform iHeartRadio.

CEO resignation

The news of ARN’s acquisition follows the resignation last month of Southern Cross long-time chief executive officer Grant Blackley.

He will depart the role at end June and be replaced by current chief operating officer John Kelly.

Mr Kelly has significant strategic, operational and financial leadership experience gained from 25 years in the Australian media and sporting industries.

Before joining Southern Cross, he spent 16 years in executive roles at Ten Network (including eight years as group chief financial officer) and three years as chief operating officer at Football Federation Australia.

In his current role, Mr Kelly oversees Southern Cross’ management teams as well as strategy, research and insights.

He also facilitates key sporting rights, television affiliations and digital audio partnerships.

Solid contribution

Southern Cross chairman Rob Murray said Mr Blackley had made a solid contribution to the company since joining in 2015.

“Under his leadership, has become a truly national media business,” he said.

“The board has appreciated Grant’s leadership over his term and particularly through the challenges presented by lockdowns and uneven recoveries following the COVID-19 pandemic.”

Chairman’s welcome

Mr Murray welcomed Mr Kelly to his new role.

“John is respected around the business for his balanced and engaging leadership style, his ability to build effective and accountable teams, and for his strong networks in the wider media industry,” he said.

“The board is confident he will hit the ground running in leading the next stage of growth for Southern Cross.”