Australian Radio Merger Talks

Audio news from Australia, as the largest radio group – ARN – has made a bid for the 2nd largest – SCA.

The regulatory issues are particularly focused on the ownership restrictions in Metro markets, where any operator can only own two stations. At the moment in Sydney for example, SCA operates FM stations Triple M and 2DayFM (Hit Network) and ARN run WSFM (Gold network) and KIIS 1065.

So as part of the detail ARN have teamed up with a private equity firm – Anchorage Capital Partners – to acquire SCA and divvy up the assets.

For ARN – they would retain the KIIS network and many of their regional radio stations and would merge in the Triple M network of 5 Metro stations alongside 51 of SCA’s regional stations.

For ACP – They would acquire the 3 Metro stations and 10 regional radio stations that ARN would need to dispose of to stay within the rules. They would also acquire, from SCA, 5 Metro stations (the Hit Network) and 25 other regional stations. They would also take ownership of SCA’s TV operation plus their digital business.

In radio terms – it looks like the KIIS and Triple M networks to ARN and the Hit and Gold network to ACP. It is also likely the existing SCA technical operation would form the basis of the ‘new’ ACP media business.

In the documents it also talks about ARN and ACP putting together their digital audio businesses into a new joint venture. This, it seems, would be SCA’s Listnr operation alongside the activity around ARN’s iHeartRadio business. In Australia ARN licence US company’s iHeart podcast tech/app platform. They then have an owned and operated digital audio content/advertising operation as well as partnering and repping a number of other shows.

Not mentioned is what would happen with national advertising and whether there’s opportunities (or a desire) to sell that together.

From the outside, this definitely looks like an opportunity to streamline the legacy audio business and build scale for a digital audio one.

For ARN, working with a company like Anchorage offers lots of opportunities. In the short term it helps them become the business they want to be, and gives them a strategic alliance with the number two competitor.

In the medium term it may also position ARN well to do further deals with Anchorage if any media regulation changes.

Anchorage themselves, will want to make a return on their investment – which in the short term means a likely reorganisation of the remainder of SCA.

In the UK, a not dissimilar deal happened when Global sold a number of its stations to a friendly buyer in Communicorp. They operate local advertising and production of their radio station separately to Global. However the brands Communicorp put their stations under and the national advertising contract are owned and operated by Global.

This is definitely not the end of the Australian story as the two companies haggle over the deal (or indeed anyone else comes along to interrupt their party).