Nine Entertainment has taken a 9.99 per cent stake in regional broadcaster Southern Cross Media, in the first of expected moves in the sector as players position themselves ahead of a likely change in ownership rules.
Nine acquired the shares from Macquarie Group for $1.15 each, a three cent discount to the target's closing price on Thursday, paying $88.3 million for the entire stake.
Southern Cross shares fell four per cent on Friday, closing at $1.13 each while Nine's shares gained four cents, or 2.6 per cent, to $1.61.
The move comes just weeks after the federal government introduced new media ownership laws to parliament in an effort to remove archaic regulations prohibiting significant media mergers.
The Turnbull government's proposed changes include scrapping the two-out-of-three rule that prevents a media owner controlling more than two of three radio, television and newspapers in an area, and another rule that prohibits a proprietor from controlling a TV licence that reaches more than 75 per cent of the population.
News Corp and Nine have been expected to lead any industry consolidation because their balance sheets are in much stronger shape than other media players.
Nine in November admitted to holding talks with Southern Cross but had hosed down merger speculation at the time.
The free-to-air TV broadcaster, which last month appointed former treasurer Peter Costello as Chairman, holds diverse interests including stakes in Mi9's news and entertainment portal, Allphones Arena, Sky News Australia and ASX-listed financial services company Yellow Brick Road.
Southern Cross Media owns 104 television channels with contracts with Nine's arch rivals Network Ten and the Seven Network, and also owns 78 commercial radio licences across Australia in a network that includes the Triple M and 2DayFM radio services.
Media analyst Steve Allen said the stake purchase was likely related to Nine's affiliation agreements with competing regional networks.
Nine currently holds a temporary, six-month licensing deal with regional broadcaster WIN, after the two broadcasters were unable to negotiate a longer deal due to a stand-off over advertising revenue.
Nine has been linked to a rival licensing deal with Southern Cross.
"This deal may be more to ensure that Nine can keep the potential for changing affiliation to Southern Cross alive," Mr Allen said.
On Thursday, Macquarie sought offers to sell part of its 26 per cent stake in Southern Cross, which it owned through a merger of Macquarie Media Group and Southern Cross Broadcasting in 2007.
Apart from the sale to Nine, Macquarie is believed to have sold another 5.7 per cent stake to institutional investors.
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