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Fairfax and Macquarie Radio Network strike merger deal

MRNFairfax Media and Macquarie Radio Network have agreed to merge in a deal that will see Fairfax take a majority shareholding of 54.5 per cent in a new enlarged listed entity.

The agreement, which had been widely expected, will bring together seven talkback radio stations, with Ray Hadley and Alan Jones both staying with the company.

Uncertainty surrounding their retention scuppered a deal earlier this year.

Fairfax Media logoThe enlarged network will include 2GB and 2UE in Sydney, 3AW and Magic 1278 in Melbourne, 4BC and Magic 882 in Brisbane and 6PR in Perth.

It does not include Fairfax’s 96FM which, in a seperate deal, has been acquired by APN News & Media for $78m.

MRN, which will remain the listed entity, will also sell 2CH.

The deal, which is subject to conditions, is expected to be completed by March has been given the support of its major shareholders John Singleton and Mark Carnegie.

Russell Tate, executive chairman and chief executive of MRN, will head the merged operations for an interim 12 months, supported by FRN managing director Adam Lang, who will be appointed chief operating officer. In addition to Tate, the Board of Directors will comprise a second MRN nominee, two Fairfax nominees and one Independent Director.

Tate said: “The combination of the two networks will unlock significant cost and revenue synergies, and provide national advertisers with ease of access to the increasingly important 45 – 69 year demographic which all seven stations in the combined group attract.”

MRN majority shareholder John Singleton added: “Joining forces is a win for both MRN and FRN. Radio was the world’s first form of social media, and the only one I understand.”

Fairfax chief executive Greg Hywood described it as a “compelling transaction”.

“The merger creates a genuine national talk radio network that was not previously available to advertisers,” he said. “The merger provides both cost and revenue synergies from enhanced network and sales opportunities that will create a more efficient and effective network for news, talk and sports radio along with music stations.”

Full ASX statement from MRN:

 Macquarie Radio Network Limited [ASX:MRN] (MRN) together with Fairfax Media Limited [ASX:FXJ] (Fairfax) today announced they have entered into a merger implementation agreement (MIA) to unite their respective radio businesses. A summary of the key terms of the MIA is attached to this announcement.

MRN will acquire 100% of the share capital of Fairfax Radio Network Pty Limited (FRN) in exchange for the issuance of new MRN ordinary shares to Fairfax and an equalising cash payment of approximately $18 million based on the net debt positions of FRN and MRN at completion. On completion of the transaction, existing MRN shareholders will hold 45.5%, and Fairfax will hold the remaining 54.5% of the fully diluted MRN ordinary shares on issue.

The proposed ‘merger of equals’ brings together Australia’s leading news-talk radio operations which occupy number one overall ratings’ positions in Sydney (MRN’S 2GB) and Melbourne (Fairfax’s 3AW). The joint venture will also consolidate the operations of an additional five radio stations across Australia:  2UE (Sydney), Magic 1278 (Melbourne), 4BC (Brisbane), Magic 882 (Brisbane) and 6PR (Perth). As part of the transaction and due to regulatory requirements, MRN will seek to divest 2CH and Macquarie Regional Radio network. The transaction does not include FRN’s 96FM (Perth) station.

Russell Tate, currently Executive Chairman and CEO of MRN, will head the merged operations as Executive Chairman for an interim 12 months supported by Adam Lang, currently FRN’s Managing Director, who will be appointed Chief Operating Officer. In addition to Tate, the Board of Directors will comprise a second MRN nominee, two Fairfax nominees, and one Independent Director.

Tate commented that “the combination of the two networks will unlock significant cost and revenue synergies, and provide national advertisers with ease of access to the increasingly important 45 – 69 year demographic which all seven stations in the combined group attract.”

John Singleton, currently the major shareholder of MRN, said: “Joining forces is a win for both MRN and FRN. Radio was the world’s first form of social media, and the only one I understand.”

Approval of the transaction by MRN shareholders is required under the Corporations Act and ASX Listing Rules. Shareholders will receive an Explanatory Memorandum, including a Notice of Meeting and Independent Expert’s Report, for an Extraordinary General Meeting expected to be held in March 2015.

The proposed transaction is subject to a number of other conditions precedent, which will be detailed in the Explanatory Memorandum that accompanies the Notice of Extraordinary General Meeting. For example, the transaction remains subject to certain regulatory approvals. The transaction is expected to complete around March 2015 pending the satisfaction of the conditions.

Each of MRN’s directors intends to recommend that MRN shareholders vote in favour of the proposed transaction at the Extraordinary General Meeting, subject to no superior proposal being received.

Each of John Singleton and Mark Carnegie has indicated that, as the major shareholder and a substantial shareholder, respectively, they will support the proposed transaction and vote in favour of it at the upcoming Extraordinary General Meeting, assuming the various conditions in the MIA are satisfied, the Independent Expert determining that the proposed transaction is in the interests of all shareholders and no superior proposal is received.

MRN is being advised by M. H. Carnegie & Co., Minter Ellison, Gilbert + Tobin and KPMG. Fairfax is being advised by Macquarie Capital, Herbert Smith Freehills and McGrathNicol.

 

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