SCA and Prime in ownership moves?

* read an update to this story here *

There is increasing talk around the possibility of two significant ownership moves taking place in the Australian media sector, each with wide-reaching impact on the radio and television landscape.

The first is the possibility of Southern Cross Austereo and the Nine Network merging to form a genuine media super-power.

The second is the prospect of Kerry Stokes Seven West Media either acquiring in its entirety, or a controlling stake in, the Prime Media Group.

For either to happen requires the ownership regulations (in television) to be relaxed. At present there is a '75% reach' rule that excludes metropolitan television networks from merging with regional affiliates.

A proposal will be tabled next week to relax this rule, therefore clearing the way for both deals to be legally able to, hypothetically, proceed.

The Southern Cross Austereo and Nine merger is believed to be the most likely, and it is understood discussions are well underway for the two companies to merge, resulting in a new market-listed entity worth north of $4 billion.

This speculation has been around for some weeks now, no doubt influencing the recent spike in the SCA share price.

The Southern Cross Austereo affiliate deal with the troubled TEN Network expires on 30 June, which would free SCA up to move their relationship to Nine, potentially displacing the WIN network, who also own I98 Wollongong and C91.3 Campbelltown.

The WIN Network are on a rolling agreement with Channel Nine following the expiration of their agreement in 2012.

SCA CEO Rhys Holleran, whilst supportive publicly, has made no secret of the fact that the performance of TEN programming into their regional television group is of concern.

Speaking at SCA's financial results presentation this week, Holleran said;

''TV ratings are challenging, but we believe we are turning the corner and we remain supportive of our supply partner Network Ten'

Were SCA to move affiliation from TEN to Nine, it would leave WIN in the unhelpful position of being likely to become a TEN affiliate, which whilst a cheaper affiliation, would align WIN with the weakest of the television groups.

Over the road, Seven West Media are in the enviable position of being debt free, and having an enormous amount of cash at hand. The company is sitting on $432 million, and is well placed to consider acquisitions.

Chief Operating Officer Ryan Stokes speaking to The Australian said;

"We're obviously very confident with the balance sheet and the potential opportunities that could open up. It gives us greater flexibility and also means we've got a very robust organisation."

Seven West Media owns 11% of Prime Media, who are valued on the market (at the close of trade on friday) at $395m. The Prime share price has increased heavily in recent weeks on this speculation. 

Prime Media reported strong performance from their television division this week, however their radio asets continue to under-perform.

The company booked it's second impairment charge in six months, of $15m, against the radio assets amidst a significant earnings downturn.

Speaking this week, Prime Media CEO Ian Audsley was positive on the impact of any move by Seven to acquire Prime, saying;

"There are synergies at both operational and corporate level”. Asked about what the annual cost synergies might be, Audsley commented “in the ten plus million dollar synergy level".

However, for either acquisition or merger to occur is reliant on the '75% reach' rule being relaxed.

If that occurs, strap yourself in, because there is a big chance that both Southern Cross Austereo and Prime Media may be moving into a new ownership structure in one of the biggest media shakeups we have seen in some years.