Media sector hots up as Nine Entertainment buys into Southern Cross

As we wrote just over two weeks ago, upcoming regulatory changes have kicked the media sector into action with a host of deals announced since then.

Today, Nine Entertainment Co Holdings Ltd (ASX: NEC) grabbed hold of 9.99% of Southern Cross Media Group Ltd (ASX: SXL) from Macquarie Group Ltd (ASX: MQG). Macquarie had held around 26% of Southern Cross before the deal.

Nine can’t yet go over the 10% mark due to existing rules, but positions the company for a potential takeover of Southern Cross, if and when the new rules come into effect.

Interestingly, Southern Cross is a regional broadcaster for Nine’s two major metropolitan competitors, Seven West Media Ltd (ASX: SWM) and Ten Network Holdings Ltd (ASX: TEN). Nine’s stake in Southern Cross could also serve another purpose – to block a takeover of the company by either Seven or Ten (or anyone else for that matter).

Billionaire Bruce Gordon — who owns WIN Corporation, Nine’s regional affiliate partner — recently entered an arrangement with Deutsche Bank to acquire 4.3% of Nine. He already owns 14.99% of Nine, and has a similar stake in Ten. Nine and WIN recently extended their affiliation agreement to the end of June 2016.

Seven’s regional affiliate Prime Media Group Limited (ASX: PRT) appears highly likely to end up in the lap of Seven – with billionaire Kerry Stokes holdings stakes in both companies.

And moves are not just taking place in the free-to-air television space. Fund manager Henderson Global Investors reported today that it had picked up more than 116 million shares or 5.05% of Fairfax Media Limited (ASX: FXJ). The manager appears to think that Fairfax is a potential takeover target. Apart from property portal Domain, Fairfax also owns a number of Australia’s most visited websites, including The Age and the Sydney Morning Herald, which might be highly attractive to prospective buyers.

Then yesterday, Telstra Corporation Ltd (ASX: TLS) was reported to be considering listing its 50% share of pay TV operator Foxtel on the ASX. News Corp (ASX: NWS) owns the other 50%, and it too may want a bigger slice of Australia’s media sector.

Foolish takeaway

There’s no doubt Australia’s media sector faces a massive upheaval if the new regulations are released, with some players staking substantial sums that they will definitely go ahead.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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