Fairfax and Nine to cut sales teams and offer improved advertising products following merger

Nine and Fairfax have flagged cuts to their sales teams, technology costs and back-office support to provide the cost savings promised in the two companies’ proposed merger.

In an information pack detailing their proposed merger released late on Friday, the two companies also flagged the prospects of improved data and advertising products from their combined operations.

Fairfax CEO Greg Hywood with his Nine counterpart, Hugh Marks

In the $50m of cost savings identified from the merger, $15m is expected to be realised in each of the companies’ media sales, IT services and back-office teams. Another $5m is expected to come from the sharing of lifestyle content.

As previously revealed by Nine and Fairfax’s CEOs, the combined business will not see the two newsrooms merged, with the latest report saying: “None of the cost synergies expected to be realised depend on the consolidation of Nine’s and Fairfax’s newsrooms or reducing the number of journalists employed in the newsrooms.”

The two companies’ sales teams will not be so lucky, with the report stating: “Savings are anticipated from removed duplication across sales teams, as well as commercial operations.”

Along with the $50m in savings, other benefits identified in the report included an improved advertiser proposition, with the combined group to offer advertisers and agencies improved products and better access to data across the merged operations.

The report also flagged the integration of Domain with Nine’s TV programming, saying: “The combined group is expected to support the further growth of Domain, including through the promotional and content integration capabilities of Nine’s FTA [free-to-air] TV network.

Earlier on Friday, Nine, Fairfax and Domain released market updates ahead of the information pack’s release, with all three companies reporting falling advertising revenues.

Domain’s market update reflected the softening Australian property market with total revenue down 1% on lower new listings and auction volumes, particularly in Sydney and Melbourne. For the September quarter, new listings in Sydney were down 8% and auction volumes were down 22%. The Melbourne market’s new listings were down 1% and auction volumes were down 18%.

In addition, Domain’s costs were up 7%, largely driven by a restructure in the company’s digital media sales offerings.

Nine told the market its revenues were flat despite the metro free-to-air advertising market being slightly softer than expected, with the network’s share of spend improving over its competitors. The company said it continues to expect the group EBITDA [earnings before interest, tax, depreciation and amortisation] of $280-300m for the financial year, before specific items.

Fairfax Media’s revenues were 5% below last year’s and Metro Media was down around 1%. Regional and suburban publisher Australian Community Media was down around 10%, while Macquarie Media was up 3%.

The market market reacted poorly to the updates with both companies’ shares dropping sharply. At the time of the merger announcement in July, the combined stock value of the two businesses was $4.2bn, on Friday it was $3.2bn. According to the information pack, the merged group has a book value of $3.1bn.

The merger, which is still to receive approval from the competition regulator, is also subject to a vote by Fairfax shareholders at a special general meeting on November 19. If the transaction passes the shareholder and regulator tests, the combined company is due to start trading on December 10.


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