Fairfax/Macquarie deal all but done
The deal for Fairfax Radio and Macquarie Radio to merge is all but done, and it might even be announced as soon as today.
Under the laws of continuous disclosure, each company must announce to the ASX any information that would be considered material to investors.
Aside from an announcement last thursday confirming that 'discussions are ongoing' , there is no update from either.
However, The Australian is reporting this morning that the complex deal is done and involves the following terms:
- The Fairfax Radio stations will be moved into the listed MRN entity which at present includes 2GB, 2CH and the regional Queensland 'Smart Radio Network'.
- Equity will be split 55% to Fairfax Media, and 45% to the existing MRN shareholders; of which John Singleton owns 71% giving Singleton a nominal 32% shareholding in the new entity.
- The new board will have 4 members, 2 from each party; Greg Hywood and Adam Lang from Fairfax, with Singleton and Russell Tate from Macquarie.
Holding the radio assets in their own vehicle makes the radio investment for Fairfax a liquid one, meaning that should an opportunity arise for a television merger, there is potential to sell down the 55% radio shareholding completely, or to the 14.9% regulatory limit.
There is believed to be around $10m in synergies to be achieved by merging the two networks, and the potential of a national, dominant commercial talk network would have both parties excited about the revenue opportunities.
However, the announcement is yet to come and when it does it will be intriguing to see a number of things:
Firstly, which station will be divested from the new entity; the loss-making 2UE, or the moderately (compared to 2GB) profitable 2CH. One of those will need to be sold, and if so, will Singleton retain 2CH for himself given his sentimental attachment to that station.
Secondly, does this open up a play for FiveAA in Adelaide, the Nova Entertainment held station and the final piece in the puzzle for a national commercial talk network.
Thirdly, will the new entity offload 96FM in Perth. There is no regulatory reason to do so, and whilst it is 'out on it's own' in terms of format and brand, it is believed to contribute around $8m in earnings to the business. This would mean, based on comparable multiples, that 96FM is likely to be worth north of $50m, so would be an attractive – albeit expensive – asset to offer.
And finally, given that Fairfax offloaded their highly profitable regional stations in Bundaberg and South Australia last year, it seems unlikely there would be a desire to retain the current Macquarie (Smart Radio) regional stations in Queensland; it is highly likely these will be sold following the merger.
It will be a fascinating couple of days, and we may know the answers, or some of them, sooner rather than later.
See Brad March's article from last week here on what the merger may mean.