SYDNEY: ARN Media Limited (ASX: A1N) and Anchorage Capital Partners Pty Limited, collectively known as the Consortium, have made a non-binding indicative offer to acquire all shares of Southern Cross Media Group Limited (ASX: SXL), commonly referred to as SCA.

The offer, dated October 18, 2023, suggests a mix of stock and cash consideration that values SCA shares at a significant premium.

Under the proposed terms, SCA shareholders would receive 0.753 ARN shares plus 29.6 cents in cash for each SCA share they hold. This offer is based on ARN’s closing share price of A$0.855 on October 17, 2023, and implies a total value of A$0.940 per SCA share, excluding the potential distribution of franking credits. The Consortium’s offer represents a 29% premium over the undisturbed SCA share price, which could rise to 46% with the inclusion of franking credits.

However, the Consortium faces opposition from SCA’s management, which announced on March 7, 2024, that the indicative offer does not align with the best interests of SCA shareholders. The Consortium has contested this assessment, emphasizing the transaction’s potential to unlock value for both SCA and ARN shareholders, particularly in the broadcast radio and digital audio sectors.

The Consortium has noted a decline in SCA’s broadcast radio and television revenue and a decrease in reported EBITDA for the first half of FY24 compared to the previous year and broker estimates. Despite these challenges, the Consortium has reiterated its offer multiple times, maintaining the original exchange ratio and cash consideration.

In a recent development, the Consortium has expressed willingness to adjust the exchange ratio up to 0.870 ARN shares per SCA share, contingent on satisfactory due diligence. This revised proposal could add an additional 10 cents of value per SCA share based on ARN’s pre-offer closing price.

The Consortium’s finalization of the revised offer hinges on several conditions, including access to SCA’s management for financial forecast validation, comprehensive due diligence on SCA’s operations, and full responses to outstanding information requests by PwC. The Consortium remains optimistic that, with prompt cooperation from SCA, a binding agreement can be swiftly reached, providing certainty to shareholders of both entities.