Australia | Jul 14 2006
By Terry Hughes
Speculation is rife as to which Australian media companies are likely to be the most attractive once the changes in media ownership laws are pushed through, but consensus appears to be building that Fairfax (FXJ) and Austereo (AEO) are the most likely targets.
In Merrill Lynch’s view Fairfax’s online assets may be attractive to potential acquirers with the broker stating they are the jewel in its crown.
In addition the company has an open share register and the broker points to a potential break up price of $4.42-$5.03.
Macquarie couldn’t agree more. The broker sees the stock as buyable for "any number of potential acquirers, both domestic and foreign."
Supporting this view is the fact that if the company was purchased by a domestic entity the number of "voices" in the cities would still not fall below five, the proposed legal minimum, unlike for Southern Cross (SBC) which if acquired by a domestic regional company would cause the number of voices to fall to four, the broker says.
The same is true for Austereo, Macquarie says, which could happily be acquired by any of the TV networks or newspaper companies without reducing the number of voices below five.
ABN Amro agrees, stating that despite a "weak earnings outlook" it is seen as a potential target following deregulation.
Macquarie has upgraded its view on both stocks to Outperform and its Fairfax target to $4.75 and Austereo to $2.20.
However, even once the law is passed, the broker cautions that some takeovers may be stopped on competition grounds.