What is Here, There & Everywhere planning to do with that big pile of money?

Welcome to Unmade, written on Wednesday morning in Morriset, on the edge of Lake Macquarie in New South Wales.

After writing yesterday’s Unmade on an iPad on a moving train, sitting at a desk today feels like a luxury.

Happy National Sandwich Day. I could easily dedicate the rest of this email to a treatise on why sandwiches are the most superior protein delivery system known to humanity… but I suspect that you’re barely tolerating my eccentricities as it is, so I won’t.

HT&E – Ready to play

There are few situations you’d rather have in Australian media right now than that of HT&E’s CEO Ciaran Davis.

At a time when many of his competitors are struggling to stay on top of debt, Here, There & Everywhere is sitting at the poker table with a big pile of chips, just as the final round of the game gets under way.

No media company has been through a bigger transformation over the last decade than HT&E.

APN had its roots in newspapers – the initials came from Queensland’s Provincial Newspapers group – and the outdoor advertising rollup of Cody, Australian Posters and Buspak.

After selling the newspapers to his predecessor Michael Miller, who had returned to the top job at News Corp, Davis rebranded APN as HT&E in 2017.

The company keeps leaving outdoor, only to choose to play one more hand in the sector.

It sold APN Outdoor to private equity, selling half to Quadrant in 2011 and the rest in 2015.

It bought out its joint venture partner Clear Channel’s stake in Adshel in 2016, before selling it on to Ooh Media in 2018.

And 18 months ago, the company spent $15m on a stake in Ooh Media. Yesterday afternoon it announced that it had sold that stake for $49m.

That could merely be taking a profit on a piece of good business. It was a canny investment when Ooh Media’s share price had plunged because of Covid. But for the most part, media company bosses don’t make passive investments in ASX listed shares. It’s not their job, and their shareholders could do that in their own right. They do it as part of a wider strategic objective.

The timing is also interesting, coming as it does just a few days after the company settled its dispute with the ATO over the sale of its NZ interests. That deal – not as painful as it could have been – already left HT&E with cash in the bank.

Back in May, the company agreed to sell its 25 per cent stake in Soprano Design, which would have realised $139m in cash and shares. And although that deal fell over, it could presumably yet happen.

So HT&E, already cashed up, appears to be in a dash for cash.

You don’t do that unless you have a wider strategy. Shareholders expect CEOs to deploy their capital, not to sit on it.

So what’s the plan? First,

there is of course the possibility that the strategy is no further advanced than recognising that a round of deal making is under way, and it’s sensible to be ready to pounce on opportunities that arise.

In terms of size, HT&E isn’t quite in the top tier, with a market capitalisation of around half a billion dollars. The moves it makes in the next few months will be its biggest opportunity to do something about that.

Or there could be specific opportunities. My first guess is that yesterday’s move says something about the company’s attitude to the outdoor sector. Ooh Media, whose market cap, is now just back over $1bn, must no longer be a potential target.

But I wonder if the sale makes owning something else in outdoor more of an option. The other outdoor giant, JC Decaux, seems highly unlikely, owned as it is by a global player.

But how about outdoor firm QMS, owned – as coincidence would have it – by private equity firm Quadrant?

Quadrant took the ASX-listed QMS private back in 2019, before the pandemic. Not long after, QMS won the giant City of Sydney outdoor tender.

Late last year, Quadrant’s boss Jonathon Pearce gave an interview to the Australian Financial Review about how he saw the acquisition.

It wasn’t just as a traditional outdoor company. He talked up the value of QMS’s sports media arm, which includes digital technology to allow stadium billboards to show different ads to different TV audiences around the world.

But Pearce also had this to say about radio:

“When we first invested into QMS, it was high on the agenda as to what we can do in terms of leading that industry consolidation. At the same time, I’ve got lots of things going on, so whether or not we’d lead it or someone else leads it, we see a natural synergy with out-of-home and radio.

“They’re two exceptional sectors. Radio is incredibly resilient, which is what we’ve always liked about it. From there, who knows, whether or not you come together with any of the free-to-air TV players or you see investment from the US media companies coming in. Again, the more traditional media companies looking to expand their global footprint to be competitive with a global Google, or what have you.”

You could read a lot into that.

HT&E’s ARN is one of only a few options that could fit that bill. With its Kiis and Gold networks, it’s the healthiest of the big three radio companies.

Southern Cross Austereo is another of course, although it seems to be pursuing a strategy of divesting its regional TV assets. And when it comes to free-to-air TV , there’s a lot more to be said for metro rather than regional stations, because they can offer the increasingly important ad-supported streaming, which their regional counterparts cannot.

And the third big metro radio company, Nova Entertainment, is owned by Lachlan Murdoch which puts it firmly in the News Corp camp.

Another interesting thing about QMS and Quadrant is that they also have a 40 per cent ownership stake in one of New Zealand’s biggest media players, MediaWorks. QMS NZ merged with MediaWorks two years ago, to create a player across radio, TV and outdoor. It later sold the TV division.

But just because Quadrant likes the outdoor-radio logic, does not automatically mean that’s the strategy being pursued by Davis and – just as importantly – his chairman, Hamish McLennan.

Another possibility for HT&E would be to turn ARN into a national rather than merely metro player – to do in radio what Seven has just done in TV. That would match SCA’s radio foot print. If so, the Cameron family owned regional radio company Grant Broadcasters comes to mind as the biggest remaining independent player. The 80-year-old company owns around 50 local stations.

Not tat there’s much reason to believe they are for sale. I note that the “about” page on Grant’s corporate website says, somewhat defiantly: “Grant Broadcasters have always been and continue to be, an Australian family-run company.”

There are, however, many permutations beyond those. Even the players involved don’t know the outcome yet. Things are starting to move. Seven’s takeover of Prime signalled that.

To go back to that poker table, good players conserve their pile of chips until the right moment. Then they go all in. That moment is approaching.

As ever, I welcome your thoughts on this, please do drop me a line to lettters@unmade.media, or via the comment button.

By the way, this was a paying subscriber-only post. Thank you for your support.

I did mention yesterday that I’d review Lisa Wilkinson’s memoir, which is published today. Having focused on HT&E today, I’ll come back to that one later in the week instead, probably tomorrow.

Have a great day.

Toodlepip

Tim Burrowes

Proprietor – Unmade