The blockbuster merger is worth A$4 billion and will see the two companies form a giant firm spanning television, digital media, print, streaming and real estate advertising.

By Daniel Herborn

Posted on July 26, 2018

The merged company will be known as Nine and would be Australia’s largest integrated media entity. The two companies plan to complete the merger by the end of 2018.

The combined company will be headed by current Nine CEO Hugh Marks. The new board will comprise Marks, Nine chairman Peter Costello, two Nine directors and three directors from Fairfax.

Fairfax had been eyeing a merger for some time and had engaged in detailed talks about a possible merger with Seven West Media but this morning’s announcement came as a shock.

A blockbuster multimedia merger

Fairfax has a range of print and digital assets, including long-running mastheads The Sydney Morning Herald, The Australian Financial Review and The Age, real estate listings portal Domain, subscription streaming service Stan and a majority interest in Macquarie Media, which operates a number of radio stations.

Under the proposed deal, Nine shareholders would hold a 51.1% stake in the combined company, with Fairfax shareholders owning the other 48.9%.

It is anticipated the merger will deliver annualised savings of more than A$50 million over two years.

Australian journalists and media commentators reacted with shock at the news. “Didn’t see this coming,” wrote Kate McClymont, one of Fairfax’s most decorated reporters, on Twitter.

Early reactions to this morning’s surprise announcement to the Australian Stock Exchange forecast some Fairfax staff including those in finance and human resources would lose their jobs in the move.

There was also widespread concern that the merger would result in a dramatic narrowing of the Australian media landscape. “Vale Australian media diversity,” wrote Courier-Mail (and ex Fairfax) journalist Paul Syvret on Twitter.

Other media figures in Australia were saddened to learn that Fairfax, a company which was founded back in 1841 and has long been one of the most influential media players in the nation, would soon be no more.

What are Nine and Fairfax executives saying about the proposed transaction?

“The Fairfax Board has carefully considered the Proposed Transaction and believes it represents compelling value for Fairfax shareholders,” Fairfax chairman Nick Falloon said in a statement.

“The directors of Fairfax will unanimously recommend that Fairfax shareholders vote in favour of the Scheme in the absence of a superior proposal.”

Fairfax CEO Greg Hywood said the proposed deal “reflects the success of Fairfax’s transformation strategy which has created value for shareholders through targeted investment in high growth businesses” including Domain and Stan.

“The combination with Nine provides an exciting opportunity to continue to drive incremental value well into the future.”
Marks said that Nine’s “strong operating momentum” has allowed it to invest in its new video on demand service 9Now, its digital publishing arm and Stan.

“This merger with Fairfax will add another dimension, creating a unique, all-platform, media business that will reach more than half of Australia each day through television, online, print and radio.”There was widespread concern that the merger would lead to a dramatic narrowing of the Australian media landscape.

What is the law around mergers in Australia?

Under Australian competition law, a merger will be prohibited if it has, or is likely to have, the effect of substantially lessening competition in any market. The two parties proposing the merger will have to demonstrate the proposed acquisition does not meet this threshold.

Parties seeking a merger can also gain authorisation from the Australian Competition and Consumer Commission (ACCC), the national competition regulator, where they can show the merger would produce a public benefit that would outweigh the anti-competitive impact of the merger.

Fairfax’s attempt to merge Stuff, its New Zealand business, with integrated media company NZME was rejected by the New Zealand competition regulator, both at first instance and on appeal.

The present merger is expected to be approved by the ACCC however.

Up until September last year, Australia had laws prohibiting one company owning print, radio and television assets in the one market. Legislation removing this requirement passed through parliament with the assistance of minor parties One Nation and Nick Xenophon Team. Media companies had argued this law was no longer relevant in a media landscape where new digital channels are becoming increasingly relevant.

The changes also revoked what was known as the “reach rule”, which prohibited a television broadcaster from reaching more than 75 per cent of the population.