Southern Cross Austereo (ASX: SXL) has announced the sale of two FM radio stations it owns on the Sunshine Coast to investment company Oceania Capital (ASX: OCP) for $17.75 million. The sale was effectively a forced sale as part of undertakings to meet regulatory requirements when Southern Cross merged with Austereo back in 2011. That Southern Cross off-loaded these assets to Oceania for $17.75 million provides a good barometer of the state of the wider radio industry.
Judging by the jump in the share prices of Fairfax Media (ASX: FXJ) and APN News and Media (ASX: APN) following the sale announcement, it would appear the market is positively re-evaluating the value of radio assets. Both stocks were up over 6%. Fairfax owns amongst others, the 2UE station in Sydney, while APN is part-owner of the national stable of Mix FM stations. John Singleton's Macquarie Radio Network (ASX: MRN) is also a listed radio play and owns the 2GB station in Sydney, however its tight share register means limited liquidity and its share price and turnover was unmoved by the announcement.
Southern Cross has been at the centre of speculation surrounding changes to the current regional broadcasting agreement between itself and the Ten Network (ASX: TEN). The sale of the Sunshine Coast radio stations is likely to further enhance investor interest it the value of Southern Cross' assets and also the value that may be created from a tie-up with Nine Network at the expense of Ten.
Foolish takeaway
Just as Warren Buffett has been cherry picking beaten down "old world" media assets in the USA, Australian billionaires including James Packer, Gina Rinehart, and Kerry Stokes have been trying to do the same here. So far it looks like they have been caught in a value trap as share prices continued to decline, however it's possible we may now have found the bottom.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
