ARN Media's proposed takeover of Southern Cross Austereo is once again up in the air, with investment group Anchorage Partners having dropped out of the company's Consortium Proposal that would have seen both companies acquire 100 per cent of the media company.

The Consortium Proposal was forced to be withdrawn after Anchorage Partners "notified ARN of its withdrawal from the Consortium", according to an update posted to the ASX this morning.

Anchorage Partners came to the decision after completing it's due diligence on SCA's regional TV assets, which have experienced continued declines in performance since the Consortium Proposal was first made in October 2023. The investment firm also cited "the further deteriorating outlook for Regional TV" and "the existing long-term contractual obligation of SCA for outsourced TV broadcast transmission" as contributing to the move.

ARN thanked ACP for its "constructive engagement as a Consortium partner and recognises the considerable investment of time and resources that ACP has made over the last seven months".

While the acquisition will no longer go ahead as planned, ARN has insisted it will continue to consider the acquisition of "certain SCA radio assets", viewing the combination of SCA and ARN's digital audio assets as "as a unique opportunity to unlock both immediate and long-term value creation".

But its not enough to keep SCA on side, with the network expressing its "disappointment" over the development.

"At considerable expense, SCA has engaged with the Consortium’s proposal for nearly seven months, during which time the Consortium has reconfirmed its proposal to SCA at least five times, most recently just seven business days ago. SCA is disappointed that the Consortium has now withdrawn its proposal," SCA wrote in its own note posted on the ASX earlier today.

SCA has said it will consider any future offer put forward by ARN, which would see SCA retain the assets that would have been required by Anchorage Partners, but noted that offloading the regional television assets was a "key benefit" of the previous proposal.

SCA Chair Heith Mackay-Cruise said: “Over the past seven months, SCA’s management team and advisers have worked diligently and collaboratively with the Consortium to evaluate the Consortium’s proposal and to enable the Consortium to substantially complete its due diligence. This has required considerable cost and management effort by SCA. It is frustrating that the Consortium has now withdrawn its proposal in circumstances where any potential material concerns should have been identified much earlier in the process.

“I wish to acknowledge that the SCA management team has supported the due diligence process without losing focus on daily business activities. Broadcast advertising markets continue to be challenging, but SCA has grown its share of metro radio and digital audio markets during this year. In addition, our LiSTNR digital audio ecosystem delivered positive EBITDA for the first time in April and is on target to do so for the June quarter.

“We remain open to considering proposals that would deliver fair value and be in the best interests of all SCA shareholders.”

The Consortium Proposal would have seen ARN acquire certain radio stations currently owned by SCA, with others to be acquired by Anchorage Partners. ARN would have owned an expanded national radio network and 50 per cent of of an independently managed joint venture holding ARN and SCA’s digital audio assets and operations (Digital Join Venture).

For its part of the deal, Anchorage Partners would have acquired SCA's television network across Queensland, New South Wales, Victoria, South Australia, Tasmania, the complimentary radio network. and a 50 per cent interest in the Digital Join Venture.

ARN Media Chairman, Hamish McLennan, said: “The requirement to withdraw the Consortium Proposal should not deflect from the significant achievements ARN has delivered this year in a challenging market. We grew total revenue to the end of April, have accelerated our digital audio revenues, regional markets continue to perform strongly, and we are on track to deliver the permanent cost-out reduction target we set ourselves for 2024. I firmly believe ARN is the most well-run audio business in Australia, and we are in a position of strength to progress the ARN Indicative Proposal for the benefit of both ARN and SCA shareholders. It would deliver a business of the scale necessary to compete against global platforms. Market restructuring has been talked about for a long time, but the fact remains that today’s regulatory environment is not reflective of the market in which Australian media operates and urgently needs government action”.