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    SCA rejects alternative ARN deal: Not ‘fair value’ or in best interests

    One day after ARN recommitted to pursuing an alternative acquisition deal with SCA – after Anchorage Capital Partners pulled the pin on its involvement in a proposed $250 million acquisition – SCA has said it “does not consider it to be in its shareholders’ interests to engage further” on ARN’s plan.

    At ARN’s AGM yesterday, chair Hamish McLennan said “we are focused on progressing the proposal with SCA,” and CEO Ciaran Davis confirmed its revised proposal would involve ARN becoming “a focused metro radio network with 10 quality stations across five capital cities, anchored by the KIIS and Triple M brands in each location.

    “NewSCA would own a national network of 44 radio stations … It would be ASX listed with an independent board and management.”

    But SCA told the ASX this afternoon that while it “remains open to considering proposals that would deliver fair value and be in the best interests of all SCA shareholders,” ARN’s latest proposal “does not satisfy either of these requirements.”

    SCA added it has “determined not to engage on any future proposal which may be provided by ARN in terms consistent with the Alternative Indicative Proposal.” The radio business had not received a “formal proposal” from ARN, despite the rival’s comments at the AGM, it told investors via the ASX announcement.

    “Over seven months of engagement, the Consortium [ARN and Anchorage] was unable to deliver its original proposal in an executable form,” SCA chair Heith Mackay-Cruise said. “The SCA Board does not believe transferring that complexity, value, and execution risk to SCA shareholders is in their best interests.”

    SCA flagged the “significant costs” involved with breaking up SCA’s networked audio platform. SCA argued ARN’s proposal would reduce its shareholders’ exposure to that platform while maintaining their exposure to regional television – which the company “has identified as non-core”. Anchorage Capital cited regional TV’s decline as the primary reason for withdrawing from the deal.

    SCA shareholders would be left with interests in two competing media businesses under ARN’s plan, the ASX statement continued, “one of which would have a market capitalisation of $100 million, which SCA considers would be sub-scale and less liquid than SCA today.”

    The proposed deal would also require SCA to transfer its LiSTNR platform and digital audio assets to ARN. The company argued that shareholders’ exposure to digital audio would shrink from 100% to roughly 36% – calculated using SCA’s implied ownership in ARN assuming an 0.87 exchange ratio. “SCA believes that retaining 100% exposure to LiSTNR is in the best interests of its shareholders.”

    “Upon receiving the Consortium’s original proposal, SCA highlighted the significant structural, technical, and other separation challenges,” the business said.

    “As of last week, despite the significant time, costs, and resources dedicated to engagement with the Consortium over the last seven months, the Consortium had not yet been able to advise a deliverable solution to resolve those fundamental structural challenges.

    “The Consortium had not responded to the first draft of key transaction documentation provided by SCA over a month ago.

    “SCA believes that the Alternative Indicative Proposal is not currently actionable and considers that there are significant execution risks to its implementation.”

    The post SCA rejects alternative ARN deal: Not ‘fair value’ or in best interests appeared first on Mediaweek.

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