Day: FiveAA a target for Macquarie

Mark Day has run the ruler over the Fairfax Radio and Macquarie Radio merger in The Australian, and has come up with a number of points.

Day's opening statement is that any deal done in the final hours before Christmas should be subjected to scrutiny in the New Year.

That said, he has described the merger as a 'win-win' for both parties, and ascribed a valuation of the new radio network, post divestment, at $185m if the multiple of 10x that Fairfax achieved for 96FM was notionally applied. 

Day goes on to forecast three further outcomes of the merger.

Firstly, that he believes the new entity will look to acquire Adelaide's FiveAA to complete a national talk network. Whilst Fairfax represent FiveAA, it is owned by Nova Entertainment.

Day says; "the new entity will at some stage seek to acquire Adelaide’s 5AA talk station from Lachlan Murdoch’s Nova group."

Secondly he states that 2GB will remain a right-wing, football focused, opinionated talk station, whilst 2UE will take the softer, more female approach. Day comments:

"For the first time a single entity will own two talk stations in a single market but common ownership insists on complementary programming. Two ambitious, opposed owners might go head-to-head for the same listeners, but a single owner logically would program to different market segments."

And finally, he notes that the station to be divested, 2CH is likely to come under earnings pressure as its audience 'dies'. 

"Audiences of AM music stations around the world are literally dying. The (2CH) licence will come with the right to broadcast three digital signals — but digital audiences will have to grow fast to provide a purchaser any hope of profit."

Time will tell whether he is right or wrong. Read the full article here.