Raid ups CanWest's share of NZ media

By KARYN SCHERER

Media group CanWest Global Communications has made a further foray into New Zealand's rapidly consolidating radio industry, snapping up a 19.9 per cent stake in the country's second-largest radio group.

The Canadian company, which already owns TV3, TV4 and the More FM radio network, confirmed yesterday that it had paid just under $20 million for a slice of RadioWorks, formerly known as Radio Pacific.

The stake was bought off-market from fund managers NZ Funds Management and Arcus Investment Management, formerly known as Spicers.

CanWest has indicated it is keen to spend another $25 million to get a controlling interest of 44.8 per cent and will make a stand in the market today and tomorrow, offering $8.25 a share.

The lightning raid yesterday appeared to catch RadioWorks by surprise, although the industry has for some time regarded the move as inevitable.

RadioWorks' strength is in the provinces, while the More FM Group has concentrated on the four main centres.

RadioWorks' board revealed yesterday that the raid came just one day after it decided to approach CanWest about a possible merger.

It also indicated it believed CanWest's offer was too low, even though it represents a 23 per cent premium on RadioWorks' previous closing price of $6.70.

To back its assertions, it released preliminary results showing its bottom-line profit for the year ending March was likely to be up 41 per cent on last year. It also noted that the company was budgeting for another strong performance over the next year.

The move comes as radio managers are due to meet in Christchurch tomorrow for the industry's annual conference, and is widely seen as an attempt by CanWest to strengthen its position ahead of the possible release of new FM frequencies next year.

While CanWest played down the possibility of cost-cutting, RadioWorks had no such qualms, revealing its board had already identified up to $5 million worth of possible savings.

RadioWorks chairman Derek Lowe was reluctant to comment further, saying he needed to talk to CanWest about its plans.

"[CanWest Radio chief executive Brent Impey] may have one strategy and our management may have another, so those are things that now have to be worked through."

Mr Lowe said he had yet to decide whether to reduce his 5 per cent stake in the company, which he has been boosting over the past two years.

The Totalisator Agency Board, which was previously RadioWorks' single largest shareholder, plans to meet today to decide what to do.

The purchase is CanWest's third major buy in New Zealand since it stepped in to rescue the ailing TV3 in 1991, and is subject to approval by the Overseas Investment Commission.

It bought the More FM group, which includes the More FM, Breeze and Channel Z brands, in 1997.

Adding RadioWorks to its stable will give it around 42 per cent of the radio advertising market.

The country's largest radio group, The Radio Network, which is part-owned by Herald publisher Wilson & Horton, is believed to have just over 50 per cent.

Radio Network chief executive Kevin Malone said the deal came as no surprise.

"It's just a continuation of the deregulation that started in this country 10 years ago ... It doesn't change a whole lot what we do on the air and in the street.

"It actually narrows our focus. Now there's two owners instead of three, it means we only have to keep our eye on one other person."