Smart sues Macquarie for $4m
Brad Smart has launched legal action against the Macquarie Radio Network (MRN) over what he claims are unpaid fees following the sale of the Smart Radio Network in Queensland to MRN in 2011.
MRN acquired the Smart network for $6m, via a subsidiary company Macquarie Regional Radio (MRR). The stations traded included; 4LM Mt Isa, 4ZR Roma, 4SB Kingaroy, 4HI and Hot FM Emerald, 4VL and CCC-FM Charleville.
The legal action is centred on what Smart has claimed is the non-payment of ‘retainer fees’ as part of the transaction.
According to the claim, as part of the acquisition MRR contracted Smart’s company Pinecam to a consultancy services agreement. This agreement was for a period of two years from September 2011, and included two related financial components:
- A fee of $12,500/month.
- A further payment equivalent to 20% of 9 x EBITDA for FY13; less the total of the monthly payments, and the cost of a book-keeper.
A final ‘earn out’ payment such as this is not uncommon and is designed to ensure the business is transitioned smoothly, with earnings not adversely impacted following a sale.
Smart claims that in March 2013, he was advised by MRN’s Russell Tate that no retainer was payable as the stations had lost money in FY13.
He goes on to claim that in calculating the EBITDA for FY13, Macquarie has failed to include;
- Revenue for ‘zero cost’ advertisements (where Smart claims MRN directed MRR to schedule advertisements at no charge).
- Revenue for ’embedded cost’ advertisements (embedded means commmercials existing in the networked 2GB programs).
- Revenue for ’embedded’ live reads.
The claim goes on to suggest that there were some staff, production, programming and maintenance costs attributed to the MRR stations that should not have been included in the calculation of the EBITDA.
Smart’s claim against MRN suggests that the EBITDA position in FY13 should have been calculated as $2.3m, and on the formula agreed, that the fee payable was therefore $4.14m.
There has been no comment from Brad Smart, or from the Macquarie Radio Network.