SCA knocks back ARN takeover proposal: ‘Not in the best interest of shareholders’
Southern Cross Austereo (SCA) has rejected radio rival ARN’s takeover proposal, officially knocking back the offer on Thursday morning.
On October 18, ARN formed a consortium with Anchorage Capital Partners and lobbed a takeover bid, in which the two company’s assets would be jumbled and restructured, with shareholders of both companies holding stock in a new venture called ARN Newco.
The deal was a certainty to close before Christmas, ARN promised, but the new year started with radio silence.
In an ASX statement issued on Thursday morning, SCA announced it would not be accepting ARN’s proposal.
“SCA has now had the opportunity to evaluate additional materials regarding the expected earnings profile of the ARN Newco shares to be offered to SCA shareholders,” the statement reads.
“The Consortium has provided these materials since SCA’s ASX announcement on 1 March 2024. Based on these additional materials and the parties’ mutual due diligence work to date, it has become apparent that there have been fundamental changes to the economics of the Indicative Proposal, including an increase in the leverage and reduction in the earnings base of ARN Newco, from that indicated by the Consortium in its original proposal. These changes have significantly reduced the value of the Indicative Proposal to SCA shareholders.
“Based on the information provided by the Consortium, the SCA Board has concluded that the current terms of the Indicative Proposal undervalue SCA and, as a result, the Indicative Proposal is not in the best interests of SCA shareholders.”
The statement adds that SCA is still willing to consider a revised proposal by ARN.
“Our Board acknowledges the strategic merit underlying the Consortium’s proposal but considers that the current terms of the proposal undervalue SCA,” chair Rob Murray said.
“We are open to considering proposals from the Consortium or other parties that would deliver fair value and be in the best interests of all our shareholders. In the meantime, we remain focused on continuing to optimise the audio ecosystem we have created across broadcast radio and digital audio. This is central to our strategy and our value proposition, and we are committed to converting our audience leading positions into sustainable growth and returns to our shareholders.”
Murray’s statement echoes CEO John Kelly’s comments when speaking to Mumbrella last week, who said at the time there was no certainty that the deal would go ahead.
“This is an incredibly complex transaction in that, if it was just a cash offer, then all we’d be considering is that cash offer versus the value of our business,” Kelly told Mumbrella.
“It’s not. It’s a cash offer of 30 cents, plus 0.753 per share, in a brand new entity which is ARN Newco, which is KIIS MMM and a digital JV which is not even in place yet. So we need to understand what the consortium views, in terms of the earnings profile, the assumptions for that earnings profile moving forward, so we actually can appropriately value the company.”
In a separate conversation last week, ARN chief Ciaran Davis told Mumbrella he believed that the offer was “eminently executable” and hoped to finalise the takeover by the end of March.
Mumbrella has contacted ARN for further comment.
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Neil Griffiths is the editor of Mumbrella. He joined the company in October 2023.
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Good recommendation. A merger has benefits .But for SXL shareholders the offer of 0.753 ARN shares is an affront. A merger would gain 40-55% share of industry metro revenues and say 30-40% EBITDA margins -all within the historic parameters of the Austereo Ltd (ASX) public performance (33% EBITDA margins FY09) .
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This would’ve been a shocking deal, extraordinary separation costs, loss of people, all to create a version of a company that fundamentally already exists (it’s called SCA). An absolute stinker, luckily sanity prevails for now.
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Roger are you using EBITA performance from 15 years ago to argue against a deal in 2024? Also the offer was .753 ARN shares plus 30c.
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Sounds like a very successful due diligence process prevailing here..
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