Nine And Southern Cross Say No Deal Has Been Struck Despite Merger Speculation

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Nine Entertainment has commented on speculation in the media regarding merger discussions with Southern Cross Media, according to a statement on the Australian Securities Exchange (ASX).

Nine confirmed that “from time to time over the past few years there have been discussions with Southern Cross Media and various commercial and broader business transactions”.

“Nine Entertainment Co and Southern Cross Media have not reached any agreement on any transaction. Should an agreement be reached at any time, NEC will make an appropriate announcement to the market in accordance with its disclosure obligations.”

Southern Cross Media has also noted on ASX that despite The Australian’s report entitled ‘Nine Entertainment, Southern Cross Austereo in merger talks’, “the company has not received or made any merger proposal”.

The Oz reported that the two companies have held direct negotiations towards a $2.2 billion merger that does not require changes to media ownership laws. While a full merger would breach the population reach as it would stretch Nine’s licence area to over 75 per cent of the country, advisers believe the deal could unfold as a two-step acquisition, the paper reports.

Per reports, Nine would buy Southern Cross’s metropolitan radio assets and stick its remaining regional assets in a holding entity, where they would sit until Turnbull and his government shake up the law to allow such a move.

If, as expected the government scraps the reach rule, which blocks the merging of metropolitan and regional TV networks, then Nine could then get full control of TV assets under conditions precedent in the deal.

Combined radio and television resources would allow for an abundance of cross promotion of programming and the use of talent across both media. Talks have been held sporadically between the two sides since early 2013, when the companies abandoned a secret $4 billion merger deal.

But merger talks have apparently been ongoing since before the departure of Nine chief exec David Gyngell, who this week was replaced by former Nine non-exec director Hugh Marks.

Reports coming out of Fairfax suggest takeover talks between Nine and Southern Cross have stalled in the past fortnight as the price of the latter spiked.

In a very ‘Who Weekly’ fashion, The Oz claims that sources close to the negotiations have revealed that contrasting views on the value of each company and their respective earning prospects have proved to be the biggest roadblock to signing on a dotted line.

“This is a 50-50 chance,” a party to the deal told The Australian.

It comes after disappointing radio ratings for 2DayFM this week, with Southern Cross Austereo admitting it got it wrong with 2DayFM breakfast, hence the added urgency to the talks.

Asked by Fairfax if talks were closing on a takeover agreement, Southern Cross chairman Peter Bush said it was “just one of the myriad things out there”.

“Look, potentially, this has been going round and round and round and under the current media laws and everything else, I don’t know whether the Nine board or shareholders have got an appetite for radio I don’t know whether our shareholders have got an appetite for free- to-air TV.”

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