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    Anchorage pulls pin on ARN and SCA deal due to regional TV decline

    Anchorage Capital Partners (ACP) has pulled out of the proposed $250 million deal that would have seen ARN and Anchorage acquire SCA, blaming the “decline in trading performance of regional TV”.

    SCA told the ASX that the withdrawal was “frustrating”, and it had only been informed about the intention for the proposal to be withdrawn on Saturday 11 May.

    In its own statement to the ASX this morning, ARN said it will continue to pursue a deal of some sort, and noted that Anchorage and its advisers completed an extensive review of regional TV as “part of its due diligence”.

    “In light of a continued decline in the trading performance of regional TV since the Consortium Proposal was made in October 2023, the further deteriorating outlook for regional TV, and the existing long-term contractual obligation of SCA for outsourced TV broadcast transmission, it does not support ACP’s regional TV investment thesis,” the statement reads.

    “As a result, the Consortium must withdraw the Consortium Proposal.”

    The withdrawal comes days after the news that regional Victorian organisation Mildura Digital Television will be shut down on 30 June. The decision means that people living in the regional Victorian town will lose access to Channel 10, 10 BOLD, and 10 Peach on free to-air.

    See also: ‘Bitterly disappointed’: Mildura to lose access to Channel 10 on free to air

    The deal had always been ambitious, and after a quick start, information about the negotiations, and updates on what shareholders could expect, largely stayed behind closed doors.

    In December, Mediaweek reported that there was “still much work to be done to get this deal across the line.”

    See also: No Boxing Day sale: SCA and ARN reveal “no certainty” that deal will eventuate

    ARN will pursue SCA assets

    ARN has said it will continue to consider acquiring certain SCA radio assets and combining ARN and SCA digital audio assets, as shareholders from both companies were “both expected to benefit” from the deal.

    ARN plans on continuing the conversation with SCA, and has put forward a revised non-binding indicative proposal, called the ARN Indicative Proposal.

    Under the ARN Indicative Proposal, ARN would acquire the same radio assets as under the original deal with Anchorage, as well as gain total ownership of the combined digital audio assets of ARN and SCA.

    SCA intends to evaluate any formal proposal from ARN, but has listed a number of concerns. 

    SCA said the potential for its shareholders to receive cash consideration and reduce their exposure to regional television were key benefits of the previous proposal, which would not be achieved by ARN’s alternative proposal.

    The company is also concerned that shareholders would be left holding an interest in two competing media businesses, and that the ARN Indicative Proposal would reduce SCA shareholders’ exposure to digital audio from 100% in SCA to ~36%.

    ‘Frustrating’: From the Chairs 

    SCA chair Heith Mackay-Cruise said:

    “Over the past seven months, SCA’s management team and advisers have worked diligently and collaboratively with the Consortium to evaluate the Consortium’s proposal and to enable the Consortium to substantially complete its due diligence. This has required considerable cost and management effort by SCA. It is frustrating that the Consortium has now withdrawn its proposal in circumstances where any potential material concerns should have been identified much earlier in the process.

    “I wish to acknowledge that the SCA management team has supported the due diligence process without losing focus on daily business activities. Broadcast advertising markets continue to be challenging, but SCA has grown its share of metro radio and digital audio markets during this year. In addition, our LiSTNR digital audio ecosystem delivered positive EBITDA for the first time in April and is on target to do so for the June quarter.

    “We remain open to considering proposals that would deliver fair value and be in the best interests of all SCA shareholders.”

    ARN Media chairman, Hamish McLennan said: 

    “The requirement to withdraw the Consortium Proposal should not deflect from the significant achievements ARN has delivered this year in a challenging market. We grew total revenue to the end of April, have accelerated our digital audio revenues, regional markets continue to perform strongly, and we are on track to deliver the permanent cost-out reduction target we set ourselves for 2024.

    “I firmly believe ARN is the most well-run audio business in Australia, and we are in a position of strength to progress the ARN Indicative Proposal for the benefit of both ARN and SCA shareholders. It would deliver a business of the scale necessary to compete against global platforms. Market restructuring has been talked about for a long time, but the fact remains that today’s regulatory environment is not reflective of the market in which Australian media operates and urgently needs government action”.

    The post Anchorage pulls pin on ARN and SCA deal due to regional TV decline appeared first on Mediaweek.

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