Radio and television broadcaster SCA is the current investment flavour in an Australian media sector limited for investment opportunity.
Shareholders must be dizzy unpacking the offers on the table, trying to work out which one is the better value.
First competitor ARN, the owner of KIIS and Pure Gold radio brands, made a complicated takeover offer, backed by private equity group Anchorage Capital Partners, to essentially form two companies.
Shareholders are being offered 94 cents per share, valuing SCA at $330 million, and made up of 0.753 of an ARN share and 29.6 cents cash for each SCA share.
SCA board directors, studying this offer to determine its true value for shareholders, now have another, also unsolicited, offer.
Entrepreneur Antony Catalano wants to back-in his newspapers from regional media player ACM and create a large media group.
This is more merger than takeover with a vision to create a powerhouse combining broadcast, audio, print and online.
SCA’s assets, including 99 radio stations under the Triple M and Hit network brands, reaching 8.89 million Australians each week, would be combined with ACM’s 14 daily newspapers and 52 non-daily titles.
The broadcaster also has 96 free-to-air TV signals across regional Australia and represents or has a joint venture with 39 TV stations, reaching 3.36 million people a week.
The deal would be cash free. Add new assets, including daily newspapers such as the Canberra Times, Newcastle Herald and the Illawarra Mercury, to SCA and ACM owners would get new shares in the broadcaster.
“ACM’s proposal was unsolicited and contemplates SCA acquiring assets from ACM in return for the issue of new shares in SCA,” say the directors at SCA.
“SCA will consider ACM’s proposal with its advisers to assess whether it would be in the interests of SCA and its shareholders to pursue ACM’s proposal.”
Much depends on the value ACM can add to the broadcast media group, how the newspapers are valued and what advantages they would bring in regional markets..
SCA, like other media, is feeling the downturn in advertising spend slowed by economic headwinds.
The company’s full year revenue fell 3.7% to $505.6 million. Audio revenue was flat at $397.2 million. Net profit after tax was down 20% to $21.9 million.
One estimate sees an uplift in SCA revenue, post the ACM deal, of 50%.
Catalano, a former CEO of Domain Group who bought ACM from Nine Entertainment in 2019, would perhaps become a 20% holder of shares in SCA.
But the board of SCA won’t be rushed into a decision on which, if any, proposal is the better deal.
Complicating the hunt for SCA is Seven West Media increasing its stake in ARN.
Seven West Media says it is supportive of ARN's current business direction and that it has no intention of launching a takeover for ARN or SCA.
“Seven West Media has a disciplined approach to value creation in the media sector," says chairman Kerry Stokes.
"We believe that this strategic holding presents strong value for our shareholders in light of sector consolidation activity.”
Seven acquired the shares at $1.10 each, spending $50.1 million on acquiring the 14.9% shareholding. It will also acquire another 5% in a cash-settled equity swap with Barrenjoey Markets.
SCA is being advised by investment bank UBS.
ARN and Anchorage Capital have Jefferies Australia.
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