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A plan by the government to scrap media ownership restraints and a number of other changes have given a boost to Australian media stocks on expectations the overhaul could trigger a wave of consolidation activity in the sector.
As part of its upcoming federal budget on Tuesday, the government flagged scrapping the 75 per cent reach rule and the two-out-of-three laws, which prevent a media owner from reaching more than 75 per cent of a free-to-air broadcast audience in any area or owning print, radio and free-to-air assets in the same city.
The government also plans to abolish licence fees for broadcasters and ban gambling advertising during live sporting events during the daytime.
Meanwhile, Fairfax Media shares are also being buoyed by a A$2.2bn ($1.6bn) takeover offer from a consortium led by private equity group TPG. The consortium this morning tabled a non-binding indicative offer for Fairfax, which publishes the Sydney Morning Herald, the Australian Financial Review and owns the rather lucrative real estate unit Domain, among other things.
TPG is offering A$0.95 cash per share for the so-called ‘crown jewels’ – Domain and the metropolitan newspapers – and wants to then spin off a range of additional assets, including online streaming network Stan and Fairfax’s New Zealand media business. TPG has valued these so-called SpinCo assets at between A$0.25 and A$0.30 per share.
Fairfax shares were up 2.6 per cent at A$1.0875 in morning trade in Sydney.
Here is how the rest of the names in the S&P/ASX 200′s media sector were performing.
- Southern Cross Media up 6.1 per cent
- Nine Entertainment up 5.3 per cent
- APN News & Media up 4.2 per cent
- Seven West Media up 3.7 per cent
- Fairfax up 2.6 per cent
- News Corp up 2.5 per cent
- APN Outdoor up 1 per cent
- REA Group up 0.9 per cent
- Sky Network Television up 0.9 per cent
The biggest mover in media, though, was Ten Network, which surged as much as 47.7 per cent. Removal of media ownership restraints could spur takeover interest in the company, which had been facing financial difficulty of late, among other industry players.
Ten’s management in a statement dated May 6 praised the government’s decision on media ownership, with chief executive Paul Anderson saying it provided “welcome, immediate financial relief for all commercial free-to-air television broadcasters.”
Now listed outside the benchmark S&P/ASX 200, Ten shares halved over the course of two sessions at the end of April when the company said it was seeking a new borrowing facility of up to A$250m and reported a first-half loss of A$232.2m.