Southern Cross Media Group Limited (ASX: SXL) (SCA) has issued a firm response to what it describes as factual inaccuracies in a recent article published by The Australian Financial Review (AFR).
The article, focusing on SCA’s long-term contract with Australian Traffic Network (ATN), allegedly misrepresents key details about the agreement and its implications.
Allegations of a “Poison Pill”
The AFR framed SCA’s long-term traffic data sharing agreement with ATN as a potential “poison pill” discouraging whole-of-company acquisition bids. According to the publication, clauses in the $100 million deal, signed in 2016 under then-CEO Grant Blackley, could trigger a significant payment to ATN in the event of a change of control.
The report speculates that this payment, linked to the remaining contract value (approximately $89 million), could deter potential buyers. With SCA’s current market capitalisation at $126 million, such a clause raises questions about the contract’s financial and strategic repercussions.
Clarifying the ATN contract
SCA clarified that its partnership with ATN, established in February 2016, includes:
• Term: An initial 20-year period ending in February 2036, with an option for ATN to extend for an additional 10 years.
• Financials: A substantial upfront payment of $100 million by ATN, along with ongoing annual payments.
• Services: Provision of traffic reports and advertising tags for broadcast across SCA’s metro and regional radio stations.
SCA emphasised that the agreement includes provisions to address scenarios such as the potential sale of its radio stations. Crucially, however, it remains unaffected by changes in SCA’s corporate control, such as a takeover or scheme of arrangement. The company states that the AFR article misrepresented this aspect, calling the portrayal materially incorrect and misleading.
Decoupling the ATN contract from TV asset negotiations
In its statement, SCA sought to decouple the ATN contract from ongoing negotiations regarding the sale of its television assets. According to SCA, the agreement with ATN has no bearing on these discussions.
SCA also reaffirmed its commitment to transparency and regulatory compliance. Earlier this year, the company disclosed the ATN contract’s commercial terms to the Anchorage Capital Partners and ARN Media Limited Consortium during due diligence. This disclosure, conducted with ATN’s consent, was part of the Consortium’s bid to acquire 100% of SCA and break up its radio network, a scenario that would require renegotiating obligations under the ATN agreement.