The Southern Cross dispute accretes fierce arguments across Australia’s financial and media sectors. Investors are divided on the Southern Cross-West Media merger proposal; critics see this $420-million deal as harmful to shareholder value and corporate governance.
What Are The Terms Of The Proposed Merger?
The $400 million merger for Seven West Media would team up television, print, and audio assets under one national outfit. The Seven West side brings the television network and newspaper operations, while Southern Cross brings Triple M, Hits radio, and the Listnr streaming service onto the union.
Seven West shareholders will get 0.1552 Southern Cross shares for every share they hold in Seven West, with their holding amounting to 49.9 per cent in the merged entity, while Southern Cross shareholders get 50.1 per cent.
The chairman of Seven West Media, Kerry Stokes, currently holding 40.2 per cent, will see his stake cut to around 20 per cent; he will remain chairman until February, thereafter, the chairman of Southern Cross, Heith Mackay-Cruise, will assume control. The new entity expects cost synergies of $25 million per annum and revenues of $1.8 billion.
Seven West Media merges with Southern Cross for $400M, combining TV, print, and radio assets
Why Are Investors Calling It “Diworsification”?
Holding an 11.3 per cent stake in Southern Cross, Gabriel Radzyminski, managing director of Sandon Capital, has been the most vocal critic. He condemned the merger as being a case of “diworsification,” thereby diluting shareholder value with no strategic intent behind it.
Radzyminski questioned the ASX takeover rules allowing such deals without shareholder votes and warned that boards should never proceed with big acquisitions without giving an account. It is like taking away half of an investor’s property without his consent, he remarked.
Former shareholder Mawhinney gave an echoing voice to the criticism, accusing boards of betraying shareholders and calling for corporate reform. He termed it reckless and damaging to add yet another dimension to the Southern Cross media merger controversy.
How Do Supporters Justify The Tie-Up?
The merger finds support despite heavy criticism: Spheria Asset Management, holding 9.9 per cent of Seven West and 13.9 per cent of Southern Cross, supports it. Portfolio manager Matt Booker was of the view that scale is necessary to bid for premium sports content, including broadcast rights for the NRL. Media entrepreneur Antony Catalano, holding 15 per cent of Southern Cross, also supported the merger, saying that media consolidation needed to occur to stand up against global tech platforms like Google, TikTok, and Netflix. Catalano states that the deal gives urgency to a moribund media market.
What Are The Broader Governance Concerns?
The Southern Cross Seven West Media merger has reignited the debate over the ASX listing rules. The current rule limits any company from issuing more than 15 per cent new shares without any approval; however, takeovers are exempt from this, which ultimately leaves shareholders without a say.
Radzyminski has formally asked Southern Cross to first amend its constitution to require approval of large share placements. Critics argue this loophole allows boards to avoid the investor view on transactions that run into hundreds of millions.
The backlash is something like a sequel to the saga surrounding James Hardie and its $14 billion takeover of Azek, which also lacked shareholder input. There is intensifying pressure on regulators to reform governance standards.
Southern Cross–Seven West merger sparks debate over ASX rules limiting shareholder say on new shares
Could The Merger Transform Australia’s Media Landscape?
If allowed, the combined entity will compete against Nine Entertainment in size, with an employee size of approximately 4000 and $230 million in EBITDA. They expect some cross-promotion between their platforms that would increase advertising opportunities and audience engagement, said Jeff Howard and John Kelly.
The set aims to use its size to withstand the global rivals and combine television, radio, and print under one banner. Howard cited Nine’s success in cross-platform integration, with whom he wants to partner.
The market welcomed this news. Seven West Media’s shares increased over 7 per cent to $0.15, while Southern Cross shares went up by 6.6 per cent to $0.90. Proponents of this deal believe that the valuation and the expected efficiencies justify the merger.
Where Does The Southern Cross Media Merger Controversy Lead?
The future of the Southern Cross media merger controversy lies in shareholder and regulatory approval. The scheme of arrangement requires 75 per cent of Seven West shareholder votes and the majority backing.
Whereas Stokes’ Seven Group Holdings will vote in favour, dissent from major Southern Cross investors could raise difficulties of procedure. This debate highlights the evolving media landscape in Australia in which consolidation might be a survival strategy and a control battleground.
Also Read: Budget Reality Check: What Actually Happened in Australia’s 2024/25 Financial Year
FAQs
Q1: What is the Southern Cross media merger controversy?
A: It refers to the investor backlash against the proposed Southern Cross Seven West Media merger, considered value-destructive.
Q2: How much is the merger worth?
A: The merger is worth about $420 million, commonly referred to as the $400 million Seven West Media merger.
Q3: Who opposes the merger?
A: Sandon Capital and a former shareholder, Mr. Simon Mawhinney, strongly oppose the merger, citing governance and valuation concerns.
Q4: Who supports the merger?
A: Spheria Asset Management and Antony Catalano, a media entrepreneur, have supported the merger for reasons of scale and competitiveness.
