Preliminary Assessment of Fairfax Radio – Macquarie Radio Network Merger
In recent days rumours have resurfaced about some form of merger again being under consideration between the metropolitan radio division of the listed Fairfax Media Group (FMG) and the smaller listed Macquarie Radio Network.
In the absence of specific details, it is not possible to be precise about the financial implications of such a merger. However, some general observations can be made based on an assessment of a simple pro-forma consolidation of the recent historical financial performance of Fairfax’s radio operations (FXJ Radio) with those of the Macquarie Radio Network (MRN).
A major conclusion of such a pro-forma consolidation is that FXJ Radio is shown to be broadly twice the size of MRN in terms of both recent revenues and profits and thus it would be reasonable to expect that FMG would be seeking to have majority ownership and management control of any merged radio entity which comprised most of the existing broadcasting assets of the two groups. It is not known how acceptable such a proposition would be to MRN’s current owners
Pro-Forma Consolidation of Historical Financial Performance
A simple pro-forma consolidation of the historical financial performance of FXJ Radio and MRN, which does not take account of any asset disposals, cost savings or other synergies which would be likely to arise from some form of merger, shows that over the last six years period, the FXJ Radio operations on average accounted for:
- 66.3% of combined total revenues;
- 65.0% of combined operating expenses (Opex) and
- about 72% of profits as measured by both earnings before interest, tax, depreciation and amortisation (EBITDA) and earnings before interests and tax (EBIT).
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