Fairfax tipped hot, merger or not
Investment bank Credit Suisse is tipping Fairfax Media as a hot stock in Australia this year on the basis that it will divest its print assets, including New Zealand operations — regardless of whether the Commerce Commission approves a merger with rival NZME.
That would likely mean the closure of New Zealand titles if a buyer cannot be found.
Fairfax New Zealand is the publisher of the Christchurch Press, Waikato Times and Dominion Post as well as the Stuff website and a number of regional papers.
NZME — publisher of the New Zealand Herald — and Fairfax NZ have proposed a merger which would see NZME pay Fairfax Australia $55 million, with the Australian parent taking a 41 per cent stake in the merged group.
The merger plan is subject to Commerce Commission approval. In its draft determination last November the competition watchdog indicated it planned to decline the application. However, following fresh submissions a final decision is expected by March.
In a research note to clients Credit Suisse analyst Fraser McLeish said that while the merger may still happen and would be an optimal outcome for Fairfax, he would expect that if it did not go ahead the company would move quickly to sell the New Zealand assets to an alternative buyer.
“If there is no alternative buyer for the whole business then we would expect [Fairfax] to look to sell off titles piecemeal where possible and close publications where this is not an option.”
This scenario would not realise much value from the business but would achieve the goal of reducing print exposure and exiting New Zealand, McLeish wrote.
The report also predicted that Fairfax Australia would move to cease publishing week day print editions of the Sydney Morning Herald and Melbourne Age titles. “We expect this process to commence in the 2017 calendar year,” he wrote.
It also tipped that a strategic review of its Australian regionals business would lead to either a sale or merger.
On the growth front McLeish said the company’s real estate website Domain was likely to see strong revenue growth in 2017.