‘LiSTNR is key in ARN Media’s proposed takeover’: Morgan Stanley does the maths

Morgan Stanley has released a report examining the current and future value of LiSTNR in any SCA/ARN deal.

“We believe further media industry consolidation makes sense,” the report states.

“But there are several challenges with the ARN deal we see: a) it’s complex (in order not to breach current media ownership laws); b) not all key details are public yet, thus it’s difficult to be conclusive; and c) it’s predominantly a share offer (25% cash, 75% shares) so SXL shareholders still end up owning a FM radio company.

“Fundamentally we see a lot of merit in putting 2x FM radio groups together. But a central problem is the media rules, which prevent the maximum cost-out potential. If the proposal goes ahead, we expect ARN would close its iHeart app … and shift all the talent + all content (podcasts) + all cross promotion of both radio groups into LiSTNR as a single audio streaming platform – that we believe would make both strategic + financial sense, which we explore in this report.”

The report lays out its argument in financial and persuasive terms, making a case that LiSTNR has been undervalued in previous deal, much as SCA chief John Kelly told Mumbrella. More to the point, any merger would see this assets explode in value.

Morgan Stanley’s belief is that “LiSTNR is developing into an important piece of the AU radio and media industry ownership puzzle.

It outlines three important points:

1. Traditional radio listenership is falling + its audience is aging (and not being replaced) … thus we see radio revenues in permanent structural decline.

2. Streaming audio platforms have grown massively over the last decade in Australia and continue to grow strongly, both in terms of users + subscribers + time-spent.

The report notes there were 16.6m streaming music subscriptions in Australia, with global players dominating the digital streaming market.

“Critically LiSTNR is the largest local competitor to these global players in Australia, albeit at smaller scale with ~2m registered users…but it present a rare opportunity for a local radio company to compete…thus, in our view, it has strategic value, particularly because it could scale-up.”

3.  How could LiSTNR be worth more? … we believe it could grow users + revenues + EBITDA even faster if owned by a larger Media group, rather than just SXL.

This final point is key.

“Scale matters in a digital world,” the report says. “If there were multiple radio (or wider media) groups promoting LiSTNR this should boost registered users, not just because of brand awareness, but because of the benefit of having more proprietary digital content, which could assist making LiSTNR a larger player in the digital advertising market, better able to compete against the global competitors.

“An enlarged LiSTNR, with more ad inventory to sell, would likely be better positioned to build an even more sophisticated range of ad products and ad tech stack and with the benefit of more 1st party data.”

So, what should LiSTNR be valued at?

“We forecast LiSTNR to generate positive EBITDA in FY25e of A$3.6m and positive FCF in FY26e,” the report concludes.

“We expect LiSTNR will continue to growing top line and profitably meaningfully over the medium term, with a 5Y revenue CAGR of and EBITDA CAGR of by FY28e.

“We forecast LiSTNR will generate a ~26% EBITDA margin by FY28e. As a result of revised earnings estimates, we also revise our base case valuation for LiSNTR to A$105m, based on a 2x EV/Sales multiple on FY25e revenues of A$52.5m.”

In short: Morgan Stanley think the merger is a good idea, but believe LiSTNR needs to be properly valued in the equation.

Here’s the maths.

Mumbrella has contacted ARN for comment.


Get the latest media and marketing industry news (and views) direct to your inbox.

Sign up to the free Mumbrella newsletter now.



Sign up to our free daily update to get the latest in media and marketing.