The Murdoch family empire - especially Lachlan Murdoch - is trying to extend its hold over Australia's commercial radio business after a $38.3 million raid on the share register of Southern Cross Media Group by rival ARN Media last night.
ARN Media, which is controversially 13.5% owned by News Corp and chaired by long-time Murdoch associate Hamish McLennan, launched its Southern Cross raid after the market had closed and is now one of the two largest shareholders with a 14.8% stake.
Southern Cross was quick to point out this morning that ARN is banned from owning any more than 15%. Its shares rocketed 24% to 94 cents in the morning trade, and ARN shares eased 1 cent to $1.03 on concerns it might have overpaid by offering a 42% premium to last night's closing price of 76 cents to secure the strategic stake.
Going into last night's raid, ARN and Southern Cross had a common largest shareholder in fund manager Allan Grey, but it is unclear if it sold into the raid and it is not represented on either board.
Southern Cross Media is Australia's second-biggest commercial radio group. Before yesterday, it was the only major radio industry player not connected to the Murdochs, although its regional television business does pump Sky News on to free-to-air television sets across the country.
This is all very complex and controversial because News Corp's co-chairman, Lachlan Murdoch, personally controls Nova Entertainment, the country's third-largest commercial network through the Nova FM and Smooth FM networks. He bought the Nova business cheaply from media-shy British billionaire trust fund kid Jonathan Harmsworth, 55, who controls the Daily Mail Group.
Given Australia retains a two-licence limit in capital city radio markets, any move by News Corp into the radio business is limited to a 15% stake, for as long as Lachlan remains co-executive chairman.
ARN Media has been listed in Australia since 1992 and for many years traded as APN News & Media, which used to be controlled by Irish media mogul Tony O'Reilly. However, after independent shareholders foolishly voted down a $6.20-a-share privatisation bid by O'Reilly and private equity firm Carlyle in May 2007, the company went into a GFC-induced spiral.
Former Perpetual fund manager John Sevior later described his decision to vote down the APN takeover as his greatest regret in his stock-picking career.
Murdoch influence over APN/ARN has ebbed and flowed in recent years. Murdoch lifer Michael Miller ended a 21-year run at News Corp to become CEO of APN in May 2013, when it was still controlled by the O'Reilly family in Ireland. This was just after the Irish parent called a general meeting to sack six directors, including CEO Brett Chenoweth, and then settled with mass board resignations.
Under Miller, APN locked up Kyle Sandilands and Jackie O on a five-year deal and launched a big investment push into radio, spending $246.5 million buying out US firm Clear Channel from its 50-50 joint venture in the Mix and Classic stations network across the country, and paying Fairfax $78 million for 96FM in Perth in late 2014.
The following year, the two major Irish shareholders agreed to sell their combined 30.8% APN stake at just 88 cents a share and News Corp swooped, picking up a 15% stake, the maximum allowed under Australia's cross-media ownership laws.
With the Irish billionaires departed and News Corp maxed out as a 15% APN shareholder, Rupert poached Miller to return as News Corp's executive chairman in August 2015 after just two years and four months at APN. He's held that role for almost eight years.
Shortly after leaving APN, Miller negotiated a deal for News Corp to buy APN's 12 daily and 60 community papers, which were concentrated in Queensland, for $36.6 million. If ever the ACCC should have knocked back an expansion, it was this creeping acquisition by Australia's biggest newspaper company - but it was waved through in December 2016 with no conditions.
News Corp later closed many of these acquired titles when COVID hit in 2020.
With Miller gone from APN, News Corp needed to resolve who would be its friendly directors on the board. When long-term chairman Peter Cosgrove bailed in June 2018, shortly after the debt-eliminating $570 million sale of APN's Adshel outdoor business to oOh!media, the board conducted an external search for a new chair. It came up with McLennan, despite his obvious News Corp connections - having worked for the company in Sydney and New York, done a stint helping out Lachlan as executive chair of Ten Network, and being the News Corp nominee as chair of REA Group, a position he retains to this day.
News Corp and McLennan had happily worked with Roger Amos as an independent director at REA Group, so Amos was slotted in as an additional ARN Media independent director in 2018, just one month after the new chair was appointed. All very cosy.
Not a lot happened over the next two years, besides handing over $71 million in a settlement with the ATO in October 2021 before it launched the bold move of paying $307 million to buy Grant Broadcasters in early 2022, a little known but impressively large network of regional radio stations.
News Corp was the second largest shareholder with 14.8% going into the Grant Broadcasters deal. The controlling Cameron family elected to take 25% of the consideration in shares, so it emerged with an 11.5% stake. This diluted News Corp down to 11.55%, but it is now back up to around 13.5% thanks to an ongoing share buyback.
ARN's big strength is the market-leading role as the country's biggest commercial radio network with 58 radio stations across 33 markets plus 46 DAB+ stations nationwide and digital entertainment platform iHeartRadio.
Southern Cross is the number two commercial network with the Triple M and Hit networks. It owns 99 stations across FM, AM and DAB+ radio. It also provides national sales representation for 34 regional radio stations.
Southern Cross also broadcasts 93 free-to-air TV signals across regional Australia, with 10 Network programming and advertising representation across regional Queensland, southern NSW and regional Victoria, Seven Network in Tasmania, Seven and Ten in Darwin, remote central and eastern Australia, and Seven, Nine and Ten in Broken Hill and Spencer Gulf. Sky News is also broadcast in 17 of SCA's regional markets across Victoria, southern NSW and Queensland. SCA also sells Sky News Regional on behalf of WIN in NSW, Griffith and Mount Gambier/Riverland.
News Corp already controls the Australian daily newspaper industry with at least more than 50% of daily sales in metro and regional markets, plus the NCA news service and the news.com.au website. News also controls 65% of Foxtel, which streams or broadcasts (or retransmits) local TV networks such as Seven, Nine and Ten in some markets and foreign news services such as CNN, Fox News, the BBC.
Nine Entertainment controls the former Macquarie radio network with top-ranked stations in several markets, including Melbourne and formerly in Sydney where 2GB has fallen behind ARN's KIIS.
With the Murdochs now in a position to block any takeover of ARN, and ARN in a position to block any takeover of Southern Cross, the family's control over Australian mainstream media assets is on the rise again. However, it does not yet own a free-to-air network after Lachlan's failed attempt to buy Ten Network Holdings with fellow billionaire Bruce Gordon in 2017. Gordon has long been friendly with the Murdochs and is now the largest shareholder in Nine Entertainment and has a seat on the board.
There are very few mainstream media outlets left in Australia that are not somehow owned or influenced by Kerry Stokes, Gordon and the Murdochs. The optics of this are not good for competition and diversity.
Communications Minister Michelle Rowland and ACMA should be keeping a watchful eye on ARN's Southern Cross raid, particularly the suitability of McLennan to remain the "independent" chair of ARN Media while simultaneously serving as the Murdoch-nominated chair of REA.
Rowland and Prime Minister Anthony Albanese have been avoiding fights with the Murdochs. Indeed, it was surprising that Rowland recently hand-picked long-time Lachlan sidekick Siobhan McKenna to be Labor's Australia Post chair. Similarly, Albanese was entertaining a crew from Nova at The Lodge only last week.
While Sky News and the Murdoch tabloids might hammer the Albanese government daily about the Voice, Brittany Higgins and all manner of other issues, some close connections are retained.
If the government wanted to hurt News Corp financially, it could opt for a tobacco-style advertising ban, which would cost Foxtel alone more than $100 million a year in gambling industry revenue.
The size of the additional gambling advertising restrictions is expected to be revealed in the coming weeks, with all commercial radio and television operators nervously awaiting the call.
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