SCA has responded to a story published online in the Australian Financial Review overnight about its contract with the Australian Traffic Network.

The story called the long term contract with ATN signed in 2016 a “poison pill” and said it was a sticking point in potential sale  negotiations.

The story is wrong according to SCA, which issued this statement to the Stock Exchange in accordance with its public company continuous disclosure obligations.

Southern Cross Media Group Limited refers to an article that was published overnight in the online version of The Australian Financial Review in relation to its long-term contract with Australian Traffic Network (ATN).

The article contains several factual inaccuracies which SCA had highlighted to the relevant journalists before publication. SCA has at all times complied with its disclosure obligations in relation to its contract with ATN including on entry into the contract on 9 February 2016 and in interim and full-year reporting since that date.

As previously disclosed by SCA in February 2016, under the ATN contract:

• ATN has agreed to provide traffic reports for broadcast on SCA’s network of metro and regional radio stations and SCA’s radio stations broadcasting advertising tags (provided by ATN) attached to news and traffic reports.
• The contract has an initial term of 20 years expiring in February 2036, with an option for ATN to extend the contract for a further 10 years.
• The contract included an up-front payment of $100 million by ATN in addition to ongoing annual payments.

Given the long-term nature of the contract and the significant up-front payment, the contract deals with the circumstances in which SCA wished to terminate or amend or no longer fulfil its obligations, which would be the case if SCA were to sell its radio stations.

However, importantly, the contract would not be affected by any change in control of SCA including a takeover bid or scheme of arrangement involving an acquisition of 100% of the shares in SCA. The AFR article is materially incorrect and misleading in this respect.

The ATN contract is not relevant to SCA’s current negotiations regarding the sale of its television assets. SCA will continue to update the market about those negotiations in accordance with its disclosure obligations.

SCA continues to respect the confidentiality of the commercial terms of the ATN contract while complying with its disclosure obligations. With ATN’s consent, SCA confidentially disclosed those commercial terms to the Consortium of Anchorage Capital Partners and ARN Media Limited and their respective advisers earlier this year for the purpose of due diligence in relation to the Consortium’s complex proposal to acquire 100% of the shares in SCA and then break up SCA’s radio network between different Consortium parties. The break-up of SCA’s radio network would have materially changed the way in which SCA could continue to meet its obligations under the ATN contract and which would need to have been resolved with ATN.

SCA expects the Consortium parties and their advisers to comply with their respective confidentiality obligations.

The statement explains that the current negotiations to sell SCA’s tv stations are not the same as the earlier negotiations about selling the radio stations, and that the ATN contract for radio traffic is not relevant to the regional tv station sale.

The last two paragraphs and the final line of the statement hint that maybe SCA suspects that one of the parties in the unsuccessful takeover bid may be leaking information or fueling gossip that the ATN deal will get in the way of SCA’s intended sale of tv assets. Such gossip could drive down the SCA share price, hence the reason for the ASX statement.

The Australian Traffic Network recently rebranded itself to highlight that its radio traffic reports gain high attention rates from listeners. It is now called atn.