More consolidation for Aussies

Southern Star goes to Fairfax Media in $408 mil deal

Australia's largest production and distribution company, the Southern Star Group, is being sold to newspaper publisher-turned-digital media company Fairfax Media Ltd. as part of an AUS$1.5 billion ($1.3 billion) carving-up of the media assets of Southern Star, parent Southern Cross Broadcasting said.

Under Tuesday's deal, the Macquarie Bank-backed Macquarie Media Group will acquire Southern Cross Broadcasting and then sell Southern Cross' network of metropolitan radio stations, the Southern Star Group, Satellite Music Australia and associated businesses to Fairfax Media for AUS$480 million ($408 million).

Southern Star includes Southern Star International, the fourth-largest distributor of English- language TV programming in the world outside the U.S., production arm Southern Star Entertainment and joint venture Endemol Southern Star.

MMG would retain Southern Cross' regional television network, which operates as affiliate stations of the Ten and Seven Networks in all states except Western Australia, as well as some regional radio stations.

Southern Cross said last month that it had sold its Channel Nine Adelaide affiliate station to Bruce Gordon's WIN Corp. for AUS$105 million.

David Kirk, the CEO of Fairfax — which publishes major Australian broadsheets the Age and the Sydney Morning Herald, business newspaper the Australian Financial Review, several newspapers in New Zealand and a number of online businesses — told analysts and media that the Southern Star acquisition will help Fairfax fulfill its digital media plans.

"We back ourselves to be able to develop a range of news- and sports- and business-related content, and building entertainment content will be very complementary for building out that overall offering," Kirk said. "The video entertainment properties will be important drivers for the next wave of growth in our digital businesses."

But analysts said Fairfax has overpaid for Southern Star and the metropolitan radio stations.

"We know to get to that number (AUS$480 million) they've paid a fair bit for Southern Star and the radio, and there was a lot of discussion about whether Southern Star represents value," Commsec media analyst Craig Shepherd said. "Historically, I don't think people have valued Southern Star as much as Fairfax has paid."

The deal is the latest in the ongoing consolidation of Australia's media landscape following the loosening of the nation's cross-media and foreign ownership laws in April. Those moves already have seen control of the Packer family's media company, PBL, pass onto private-equity investors, Kerry Stokes sell half of his Seven Network to Kohlberg Kravis Roberts, and CanWest Global Communications move to take control of Network Ten in deals worth an aggregate of more than AUS$10 billion ($8 billion).