Southern Cross Media Group (ASX:SXL) has informed its potential bidders – radio rival ARN and private equity firm Anchorage Capital – to come back with a higher offer.

In a statement to the ASX on Thursday morning, Southern Cross (SXL) indicated that changed circumstances in the radio market have undermined the value of the proposed offer.

The offer terms from October 18, 2023, were 0.753 shares in a reconstituted company following reallocation of SCA and ARN assets (ARN Newco), 29.6 cents cash per share, and 12.7 cents a share in franking credits by way of a recommended scheme of arrangement (Indicative Proposal).

That valued SXL shares at around 94 cents each – they rose 1% on Wednesday to 97 cents and were around 73 cents a share when the offer was first made.

ARN shares, however, fell 4% on Wednesday to 83 cents and are around the level they were at when the offer was first made last October. But they have been higher since then and are down 17% year-to-date this year. This is despite struggling Seven West Media buying 14.9% of ARN (plus a cash-settled swaps deal covering another 5%) a month after the Southern Cross bid was launched.

With News Corp holding 13.2% of ARN's shares, the situation is getting complicated. Seven West last year ruled out a bid for ARN or Southern Cross but with the bid now being rejected, will that change?

In Thursday's statement, SXL said it acknowledges the strategic merit for SCA shareholders of combining complementary and high-performing radio and digital assets of SCA and ARN in ARN Newco and reducing exposure to regional television on appropriate terms.

"The Board and management have therefore constructively engaged with the Consortium and its advisers in evaluating the Indicative Proposal.

"SCA has now had the opportunity to evaluate additional materials regarding the expected earnings profile of the ARN Newco shares to be offered to SCA shareholders. The Consortium has provided these materials since SCA's ASX announcement on March 1, 2024.

"Based on these additional materials and the parties' mutual due diligence work to date, it has become apparent that there have been fundamental changes to the economics of the Indicative Proposal, including an increase in leverage and a reduction in the earnings base of ARN Newco, from that indicated by the Consortium in its original proposal.

"These changes have significantly reduced the value of the Indicative Proposal to SCA shareholders.

"Based on the information provided by the Consortium, the SCA Board has concluded that the current terms of the Indicative Proposal undervalue SCA, and as a result, the Indicative Proposal is not in the best interests of SCA shareholders."

SXL said that despite the new assessment of the current terms of the Indicative Proposal, "SCA remains willing to consider any revised proposal which SCA assesses as being consistent with the Consortium's original proposal and in the best interests of all SCA shareholders."

Chair Rob Murray said in Thursday's statement that it still saw the merit of a deal with ARN and Anchorage but "considers that the current terms of the proposal undervalue" Southern Cross.

"We are open to considering proposals from the Consortium or other parties that would deliver fair value and be in the best interests of all our shareholders."