Nine and Fairfax Media conquer final hurdle, merger cleared

The Federal Court has approved the Fairfax Media and Nine merger, making way for one of the biggest consolidation moves in media history.

At a hearing in Sydney this morning, Justice Gleeson cleared the merger, despite ongoing efforts from former Domain CEO Antony Catalano to stop it going ahead.

Fairfax Media CEO Greg Hywood and Nine CEO Hugh Marks on the day of the merger

Catalano flagged his intentions to dispute the merger in court, and filed documents alongside Aurora Funds Management to the Federal Court. Under his initial proposal, Catalano planned to sell off majority of Fairfax Media’s assets, including Macquarie Media, Stan, and Fairfax publications across regional Australia and New Zealand. The ex-Domain exec still has a chance to appeal the decision.

The court hearing today gave Fairfax shareholders like Catalano the chance to oppose approval of the scheme. But at the Fairfax Annual General Meeting last week, 81.49% of shareholders were in favour of the merger, while 18.51% were against the deal.

A Fairfax Media spokesperson showed no concern when asked about Catalano’s court documents yesterday, saying: “We are not aware of a single reason why we would do anything other than proceed as planned.”

Today, Aurora Funds Management – the investment vehicle for Nick Bolton – expressed concerns over “validity of proxies” and “voting mechanics”.

Meanwhile, Catalano’s lawyer raised three matters. Firstly, he raised concerns that the independent reviewer of the scheme, Grant Samuel, did not provide shareholders with information adequate enough to make an informed decision. He also expressed concerns about how the voting took place and how his proposal was dealt with by Fairfax at the scheme meeting.

Catalano’s lawyer made reference to the falling share price of Nine in the wake of the merger announcement, and requested a second independent expert report.

When asked by Justice Gleeson what Catalano gained from delay of scheme approval, his lawyer said “confidence” that shareholders were properly informed.

Fairfax Media’s counsel, Ian Jackman, said the “so-called proposal” was “no more than a highly generalised strategy…subject to conditions which were not approved.” Justice Gleeson also questioned an ASIC representative over value to shareholders and the efficiency of Grant Samuel’s independent valuation.

ASIC raised no regulatory concerns regarding the report and the other matters.

Justice Gleeson rejected Catalano’s request to have court orders delayed for 24 hours to decide whether an appeal would be launched. Gleeson denied the request on the basis he can appeal the decision until implementation of the proposal on December 7.

Now court approval has been achieved, Nine and Fairfax Media will proceed with the scheme, which will see them operate at a joint entity from December 10.

It was the last hurdle for Nine and Fairfax, owner of the Sydney Morning Herald, The Age and the Australian Financial Review, which first announced the merger on July 26. Since then, the two businesses have awaited Australian Competition and Consumer Commission (ACCC) shareholder and court approval.

Under the terms, Nine will acquire a 51.1% stake in the Fairfax Media business, with the Fairfax corporate brand name to be absorbed. Nine CEO Hugh Marks will lead the business while Fairfax Media CEO Greg Hywood will step down. It comes a week after shareholders approved the deal, and three weeks after the ACCC announced it had no objections.

The merger is the biggest proposal to come out of the media reforms – which include the repeal of the two out of three and 75% media ownership rules – since they were passed late last year.

In a note sent to staff, Nine CEO Hugh Marks described the merger as “remarkable”, with “quite breathtaking” opportunities.

“This deal is all about our strategy for the future together and it promises exciting opportunities for our employees, our clients and our audiences. Together we will provide our audiences with the best of entertainment and quality journalism on the platform they choose. As one company,” Marks said.

“Over the next fortnight, we will be in a position to share the new organisational structure and impact on the key divisions of the business. You will be hearing from me frequently to ensure you are all informed as soon as we are in a position to confirm details. We will also update the merger portal to your give access to relevant information, Q&As, and org charts.”

At 2pm today, Fairfax shares were up to 64 cents, while market capitalisation sits at $1.46b. Nine’s shares are trading at $1.70. It’s market capitalisation sits at $1.48b.

UPDATE 10:12AM November 28: 

Fairfax Media has released a note on the ASX informing shareholders the merger scheme is now effective. Fairfax shares will be suspended from trading on the ASX from close of trading today. The new Nine shares will commence trading on November 29, initially on a deferred settlement basis.

The scheme will be implemented on December 7.

The Nine and Fairfax Media merger timeline:


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