Southern Cross Broadcasting chairman John Dahlsen made it pretty clear
at yesterday’s AGM what he thinks about the valuations Macquarie Bank
is putting on its regional radio empire as part of the sale into the
new Macquarie Media fund. Don’t expect the man who helped build
Australia’s dominant commercial talk radio network to apply for any
shares.

Couple that with an extraordinary attack on the prospectus by Trevor Sykes in Saturday’s AFR
and you’ve got to ask yourself whether the Millionaire Factory will be
able to get the Macquarie Media float away within the indicative price
range.

Crikey sat next to Sykes in The AFR’s Sydney
office for a couple of months in mid-1999 as the dotcom boom was
ramping right up. The veteran of more than 50 years in business
journalism was scathing of over-hyped floats back then too. I can well
remember his utter refusal to touch the Austar float which they got
away at $5 a pop, meaning investors who subsequently watched the stock
fall below 20c took a real bath, although it did peak at more than $7
and has now recovered to $1.16 after being recapitalised.

Sykes told his loyal band of followers on Saturday that the Macquarie
Media prospectus “should be thrown on the barbecue” and that Macquarie
was effectively getting its 20% stake in the fund for $12 million, such
was the hefty profit it was booking.

We asked Sykes if Macquarie Media had reacted angrily and he replied as follows:

Chairman Tim Hughes rang me to say that there was some $90m
debt in the radio companies when they were bought, which ought to be
added back to the entry price. He also reckoned they’d improved
profitability and were selling on the same EBITDA multiple (12.2 times)
as they bought, but because profitability had risen the number had
risen.

Given that ASIC has also been forcing changes to the Macquarie Media
prospectus, this float certainly hasn’t been all plain sailing and
there are now serious doubts that they’ll get anywhere near the top of
the range, which is $3.05 a share for the first instalment.

It still looks expensive at $2.70, the bottom of the range, and after
that it all comes down to your belief in the Macquarie machine. The big
question is whether Macquarie is prepared to go below the range if the
demand does not materialise.