Australia’s Nine Entertainment and Fairfax Media to Merge in $3 Billion Deal
SYDNEY–Australian media companies Nine and Fairfax are due to merge in a 4.2 billion Australian dollar, or $3.1 billion, deal, one of the biggest media shakeups in the country’s history that would birth an entity that reaches more than half its populace every day, stirring outcry over a curtailment of media diversity.
In a joint announcement to the Australian Securities Exchange on Thursday morning, Nine Entertainment Co. Holdings Ltd. and Fairfax Media Limited said they had entered into a Scheme Implementation Arrangement under which Nine will acquire all Fairfax shares.
Nine would be the dominant partner, its shareholders holding 51.1 percent of the merged company’s shares, with Fairfax shareholders owning the remaining 48.9 percent.
The new combined entity, to be called Nine and thus bidding adieu to 187 years of the Fairfax name, would embrace Nine’s free-to-air television network; a portfolio of high growth digital businesses, including the streaming services Stan and 9Now; Fairfax’s legacy print mastheads that include The Sydney Morning Herald, The Age and The Australian Financial Review, plus its Macquarie Media radio interests and digital advertising businesses. The latter include the lucrative real estate site domain.com.au, which was recently floated as a separately-listed company on the ASX, with Fairfax holding a roughly 60 percent stake.
Nine’s current chief executive officer and chairman, respectively Hugh Marks and Peter Costello, are due to head the new combined firm, with Fairfax due to contribute half of the proposed six-strong board.
Fairfax directors have unanimously recommended the deal, subject to an independent review and in the absence of a superior alternative offer.
Nine’s offer to Fairfax shareholders is 0.3627 Nine shares for each Fairfax share they currently own, plus 0.025 Australian cents cash per share.
The latter represents a 21.9 percent premium to Fairfax’s closing share price of 77 Australian cents on July 25.
The merger is expected to deliver 50 million Australian dollars in annualized pro-forma cost savings, to be fully implemented over two years.
Fairfax ceo Greg Hywood said the strength of the combined management team and staff would ensure the continuation of Fairfax’s quality journalism. But the move has stirred up considerable backlash over concern of a shrinking media landscape. As Nine’s Marks pointed out in the announcement, the merger creates “a unique, all-platform, media business that will reach more than half of Australia each day through television, online, print and radio.”
The country’s Media, Entertainment & Arts Alliance (MEAA) has called on the Australian Competition and Consumer Commission (ACCC) to block the takeover.
“Any further cuts to editorial journalism at Nine and Fairfax would bite into the muscle, bone and soul of the newsroom,” Marcus Strom, president of MEAA Media said. “The proposed savings of $50 million in two years should come from trimmings to bloated executive salaries and from any back-office rationalization.”
The ACCC said it would commence a public review of the proposed merger, taking around 12 weeks.
“When reviewing mergers in the media sector, the ACCC considers the competition impact on consumers (both readers and viewers), advertisers and content creators/sellers. The impact of technology on the media sector will be a critical part of the competition analysis,” a spokesperson for the government agency said.
The deal comes 10 months after a major overhaul of Australia’s media ownership legislation, which scrapped the so-called “two out of three” rule that previously blocked a single person or company from owning commercial radio and television licenses and a newspaper in one city.
It is seen by some as a bellwether of things to come for the Australian media industry, given the ongoing digital disruption which will see internet advertising grow 7.4 percent over 2017-2018 to reach 8.69 billion Australian dollars this year, representing 54 percent of the advertising market, according to the Zenith Advertising Expenditure Forecasts report for 2018.
In contrast, newspaper advertising is expected to decline 12 percent to 1.13 billion Australian dollars over the year; with magazines down 17 percent to 314 million Australian dollars; and television down three percent to 3.76 billion Australian dollars.
Australia’s total advertising spend is predicted to grow to 16 billion Australian dollars, up 2.6 percent.
“It’s low [advertising] growth and all of the growth and more is going digital, particularly to Facebook, Google and Instagram and that will continue as long as the media agencies really don’t value print products” said Sydney-based media analyst Steve Allen, the managing director of Fusion Strategy.
Allen believes any staff cuts from the proposed Nine-Fairfax merger are likely to be from the top down.
“Everyone just assumes–I think wrongly–that there are going to be redundancies,” Allen said. “The only redundancies that we can see [are]: you don’t need two boards, you need one. Greg Hywood hasn’t made it clear what his future is, so we think all the redundancies will be high value, senior executive redundancies. They wont be at the lower levels.”
He added, “This is the first real big merger than comes out of the change in the media laws and we think others will come”.
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