Southern Cross reviewing its options for television shake-up
While not referring directly to its negotiations with Nine Entertainment, Southern Cross confirmed that, with its affiliation arrangement with the embattled Ten network expiring midyear, it is exploring its options.
"The board has not, at this stage, formed a view as to any preferred option," Southern Cross said in a statement.
The company is also in talks with Nine about a merger that would act as a reverse listing for Nine.
While Southern Cross's largest shareholder, Macquarie Group, has been driving the merger proposal, its second-largest investor, Allan Gray, said it was not opposed to a deal as long as the price was right.
"It makes strategic sense if it is done at the right price," said Allan Gray's Simon Marais.
Southern Cross noted that legislation prohibits any merger with metropolitan TV stations, Seven, Nine and Ten.
The news further boosted the Southern Cross share price, which has jumped nearly 40 per cent in a few weeks on takeover speculation. The stock closed 5¢ higher at $1.575 on Monday, its highest close since May 2011.
If Communications Minister Stephen Conroy carries through his promise to lift rules preventing a commercial TV broadcaster from reaching more than 75 per cent of the Australian population, it is expected to trigger mergers between the metro broadcasters and their regional affiliates.
The lapse of Nine's affiliate deal with its regional partner WIN Television last year and the expiry of Ten's deal with Southern Cross this June, raises the possibility of the networks swapping partners ahead of any potential mergers.
But there are obstacles to a scenario that would see Nine dump WIN in favour of Southern Cross and use the merger as a back-door listing on to the share market.
One is whether Senator Conroy gets legislation passed. Then there is the issue of Nine and Southern Cross agreeing to a deal.
Most importantly, Nine will still need a commercial relationship with WIN to provide content to the Channel Nine stations in Adelaide and Perth, which WIN owns.
Losing Nine as an affiliate will be costly for WIN. The regional TV provider would be forced to deal with Ten, which is rating at half the level of Nine in regional Australia.
One analyst said that it raised the possibility that the whole exercise was "theatre" designed to extract better deals from the current partners of Nine and Southern Cross.
Frequently Asked Questions about this Article…
Southern Cross Media has confirmed it is reviewing a number of strategic options, including a possible merger and changes to its network affiliation arrangements. The company is exploring these options because its affiliation deal with the Ten network expires midyear, and the board has not yet settled on any preferred course of action.
Yes — the article says Southern Cross is in talks with Nine about a merger that could act as a reverse listing for Nine. However, Southern Cross also notes that legislation restricting mergers with metropolitan TV stations (Seven, Nine and Ten) is a key constraint that could affect any deal.
Takeover speculation has lifted Southern Cross’s share price sharply — the stock jumped nearly 40% over a few weeks and closed 5¢ higher at $1.575 on the Monday referenced in the article, its highest close since May 2011.
Southern Cross’s largest shareholder, Macquarie Group, has been driving the merger proposal. Its second-largest investor, Allan Gray, says it is not opposed to a deal provided the price is right — with Allan Gray’s Simon Marais saying it ‘makes strategic sense if it is done at the right price.’
If Communications Minister Stephen Conroy proceeds with lifting the rule that prevents a commercial broadcaster from reaching more than 75% of the population, it is expected to trigger mergers between metropolitan broadcasters and their regional affiliates — potentially enabling deals between metro networks and regional groups like Southern Cross.
The article raises that possibility because Nine’s affiliate deal with WIN lapsed last year and Ten’s deal with Southern Cross expires in June. But there are clear obstacles: whether Conroy’s legislation passes, whether Nine and Southern Cross agree a deal, and the fact Nine would still need a commercial relationship with WIN to supply content for its Adelaide and Perth stations.
Losing Nine as an affiliate would likely be costly for WIN — the article says WIN would be forced to deal with Ten instead, and Ten is currently rating at about half the level of Nine in regional Australia, which would hurt WIN’s ratings and commercial position.
Yes — the article notes that at least one analyst suggested the whole exercise might be ‘theatre’ intended to extract better commercial deals from the current partners of Nine and Southern Cross, rather than an imminent concrete transaction.
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