Fairfax lifts on media deal

Shares hit seven-year high over merger with Nine

FAIRFAX Media shares have jumped to their highest level in seven years on the surprise announcement yesterday of a merger with Nine Entertainment that will create a $4 billion media giant.

The move will cut costs for the broadcaster and the publisher, both of whom have faced huge pressure from increasing competition and dwindling advertising revenue.

It creates a single entity with exposure to network TV, streaming and news delivery that Nine and Fairfax claim will reach more than half of Australia through television, online, print and radio.

The Fairfax board will unanimously recommend shareholders vote in favour of the cash-and-scrip deal under which they will receive 0.3627 Nine shares and 2.5 cents for each share. That values each Fairfax share at 94 cents, a 21.9 per cent premium to Wednesday’s closing price of 77 cents.

Following the announcement, Fairfax shares were 9.25 cents, or 12 per cent, higher at 86.25 cents by 1203 AEST yesterday – their highest since May 2011 – and closed at 83.5 cents.

Nine shares dipped 26 cents, or 10.32 per cent, to close at $2.26.

If the transaction, which also requires regulatory approval, is completed, Nine will emerge with a majority 51.1 per cent of the combined entity.

The new entity will be “Australia’s largest integrated media player” and include Nine’s free-to-air TV network, Fairfax’s masthead newspapers and radio interests, and Fairfax’s stake in online property classifieds giant Domain.

Netflix rival Stan – an existing joint venture between the two companies – will be wholly owned by the new entity.

Overall, the merger is expected to deliver at least $50 million in annualised cost savings.

Nine chief executive Hugh Marks will lead the new company, while Fairfax directors will join a board helmed by Nine chairman and former Liberal federal treasurer Peter Costello.

“Both Nine and Fairfax have played an important role in shaping the Australian media landscape over many years,” Mr Costello said in a statement.

“The combination of our businesses and our people best positions us to deliver new opportunities and innovations for our shareholders, staff and all Australians in the years ahead.”

However, it appears some assets could be sold or reassessed following the merger.

The competition watchdog will begin consultation on the deal next week, and regulator ASIC will also review it.

Pending the approval of Fairfax shareholders, the merger is expected to be completed by the end of 2018.