Nine and Fairfax Media to merge businesses
One of the biggest moves in the Australian media’s history is underway, with Nine Entertainment and Fairfax Media set to merge businesses.
Nine announced the news on the Today Show this morning, telling the audience the deal would conclude by the end of 2018. It 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.
The combined business will be led by Nine CEO Hugh Marks. The three current Fairfax directors will be invited to join the Board of the combined business, which will be chaired by Nine chairman Peter Costello. Fairfax Media CEO Greg Hywood will depart the business once the transaction is completed.
Under the proposed transaction, Nine will establish itself as one of Australia’s leading independent media companies, owning 51.1% of the combined entity. Fairfax shareholders will own the remaining the 48.9%. The Fairfax Media brand will absorb under the new terms, and the new business – known as Nine – will make up 20% of above the line advertising spend across Australia.
The combined business will include Nine’s free to air network, digital businesses Domain, 9Now, its joint venture with Fairfax Media – Stan – as well as Fairfax’s mastheads, which includes The Sydney Morning Herald, The Age and The Australian Financial Review. It will also include Fairfax Media’s 54.5% holding in Macquarie Media.
Commenting on the proposed transaction, Nine’s chairman Costello said the combination of the two businesses and its people would allow for “new opportunities and innovations” for shareholders.
Fairfax chairman, Nick Falloon, added the Fairfax Board thought the proposed transaction represented “compelling value”.
“The structure of the Proposed Transaction provides an exciting opportunity for our shareholders to maintain their exposure to Fairfax’s growing businesses whilst also participating in the combination benefits with Nine,” Falloon said.
Nine’s Marks said Fairfax Media would add another dimension, creating a “unique, all-platform, media business”.
“For our audiences and employees, this means we will continue to be able to invest in premium local content across news, sport, entertainment and lifestyle. For our agency partners and advertisers, we will provide an expanded marketing platform with even greater advertising solutions underpinned by a significantly enhanced data proposition,” Marks said.
“For our shareholders, the merged business will generate an increasing percentage of its earnings from high growth digital businesses that provide a compelling opportunity to generate both incremental value and cash flow into the future.”
In a note to staff, Marks described the deal as a “ground-breaking” merger which would harness the strengths of two of Australia’s biggest brands. He stressed the merger was not about cost reductions.
“Such a merger of two major media groups will of course result in some duplication of functions and you will read about synergies that will be pursued by the business as part of this transaction. But let me stress this merger is not about cost reductions.
“This merger is all about creating a business with the diversity and scale of revenues and earnings to be able to continue to do what we are all about. Create great content. Distribute it broadly. And engage our audiences and advertisers. Ultimately our people will all have new opportunities across more platforms, brands and identity to connect with audiences,” he said.
“We will of course be outlining more details of the merged business over the ensuing months, but for now we embark on this new expanded phase of our company’s journey, with a scale of resources and platforms to continue to build on our shared heritage and iconic brands.
“Make no mistake, these are exciting times for Nine. I look forward to joining with you all in making this merger an outstanding success. It’s a big deal. And it promises to substantially strengthen and reinforce what’s so great about our business into the future.”
Fairfax Media’s chief executive officer, Hywood, added: “The Proposed Transaction for Fairfax reflects the success of Fairfax’s transformation strategy which has created value for shareholders through targeted investment in high growth businesses, such as Domain and Stan, and prudent management of our media assets. The combination with Nine provides an exciting opportunity to continue to drive incremental value well into the future.
“We are confident that the strength of the combined management team and staff will ensure the continuation of our quality journalism.”
According to a release on the ASX, directors of Fairfax Media will unanimously recommend shareholders vote in favour of the Scheme. Fairfax Media and Nine have now entered a scheme implementation agreement.
Nine and Fairfax Media have had a longstanding relationship, launching joint venture TV and streaming service Stan in 2014. Late last year the two companies and News Corp entered a co-operative agreement, which would see anonymised digital identities shared between the three platforms. The news comes a week after Fairfax Media and News Corp announced they had entered an agreement to share printing presses.
At close of business yesterday, Nine finished with a market capitalisation of $2.20b while Fairfax Media finished with a capitalisation of $1.77b.
For the year June 2018, Nine is expecting to report group earnings before interest, tax, depreciation, and amortisation (EBITDA) at the top end of the $250-$260m range. Fairfax is expecting to report group operating EBITDA of $272–275m.
Your move News Corp.
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Take that News!
I can also see the vultures (recruiters) having a field day with the unfortunate and inevitable staff cuts.
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Where does this leave the Nine/SkyNews JV?
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I wonder who is spinning in their graves faster – Wocka or Kezza?
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Is this Stuff NZ as well?
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Fantastic transaction and will be a great result for shareholders. Well done to all involved.
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Sounds more like a takeover than a merger but a big deal nonetheless and strengthens Nine’s position.
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Interested to see what happens to ACM (Regional titles) and Fairfax NZ. No mention of them. Is there a buyer for these businesses outside of this deal?
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Not sure about the commenters above, however I felt that whilst it was falling away, at least Fairfax brought the other side of the story that News Corp was reporting. Nine are a little more right of centre than Fairfax, (correct me if I am wrong). So, will this result in the public receiving far more propaganda and a less balanced viewpoint (note Costello as chair at Nine…).
This might be a big win for The Guardian?
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This is a disaster for quality, independent journalism. It’s exactly what people warned would happen when media ownership laws changed.
I feel for the staff (mostly Fairfax) who will lose out. Their management has been a basketcase but the journos have stuck with it.
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Kerry would love this. Fairfax disappears altogether into Nine. In fact some of us think that was the plan when packer’s trustee was the guy who ran the Fairfax board.
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This is a sad day for independent journalism. I feel like there will be more mergers (or takeovers) from other publishers in the near future as well.
Any bets on who’ll merge next?
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So Hywood’s plan over the past decade has transpired. The complete demise of Fairfax is now complete. Yes, they will spin it that it is good for shareholders but ultimately what we are looking at here is the death of one of Australia’s oldest institutions. Farewell Fairfax and RIP.
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WRONG! This deal was looked at about a billion times in the past 20 years (as was the Fairfax-TEN option). Despite much spruiking by certain prominent investment banker types it never had legs because there’s no value in it. A classic case of what boards and management do when they’ve nowhere to go.
The good news is that the decline of old empires is near complete. Then we can see what more capable innovators can do with the consumer apetitite for actual quality.
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Deck chairs. Titanic.
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Nine shares down sharply. Fairfax shares up sharply. Conclusion: drowning man is taking another with him.
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Scandalous that Hywood was paid so much and will get a fat exit with this. He has cooked up Domain from the tissue of Fairfax businesses, effectively building a Potemkin village. He allowed the content opportunity to go past while he shrunk Fairfax into a mindless traffic runner. Now he has made Fairfax disappear altogether.
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Shuffle shuffle
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I reckon it is DEAD.
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This is the question that has the most real world ramifications for people outside of Sydney and Melbourne. Rural Press/Fairfax monopolised then gutted those papers, offshored production, offered appallingly lax training to young journalists, dumped all the experienced ones, closed and centralised the presses, centralised the onshore production and centralised content management and web platforms.
If Nine doesn’t plan on keeping them then it’s curtains for most of Australia’s regional
media.
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In one of the first decisions, they decide to go literally with a ‘number’ for the brand, that has no sense of differentiation from its direct competitors versus an iconic 170 year old Aussie household name who has recently spent considerable resources on ‘Independent. Always. i.e. a position! What does Nine stand for…waiting.
And please revert to NEC, just for my amusement
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Too much myopia going around – this is good news in the long run given it creates a much stronger financial platform to support publishing. It’s head in the sand stuff to think traditional publishing media will exist for very much longer if companies don’t keep looking at ways to reduce costs while the revenue continues to ebb away.
The cost reductions available in the merger will help extend the runway which is ultimately advantageous to journalism. The counterfactual is not the status quo for this industry – the counterfactual is no more at-scale publishing media (and in the not too very distant future). I don’t think we want to be in a world where the only journalism is government-funded or citizen journos posting on platforms like Facebook or their blog. We need large, at-scale, commercially funded news media and it’s a hard but inevitable reality that mergers like this are the main way to achieve this at this point.
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Totally agree ;(
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Wake Up! Consolidating publishers such as this is the only way to compete with the likes of Google & Facebook. We all sit here and complain when really if they didn’t do this we wouldn’t have any true Aussie content left…bring on the new future of Australian media!
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The disaster for quality journalism happened decades ago. The disappearance of Fairfax is not the cause of the disaster, but its consequence.
You have to go back to the 1960s to see the Herald at its peak.
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Neither Nine nor Fairfax is right of centre. But of the two, Fairfax is well to the left. Or I should say, was, in the years of its decline.
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9 are 100% right of centre?
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FROM THE VIEWPONIT OF A MACQUARIE SPORTS RADIO LISTENERS IN MELBOURNE THE MERGER BETWEEN FAIRFAX MEDIA & NINE ENTERTAINMENT COULD WELL BENIFUIT MASCQUARIE SPORTS RADIO WITH MUCH MORE SPORTS CINTENE AND MORE SPORTS TALENT ACCROSS MACQYUARIE SPORS RADOO IN MELBOURNE, SYDNEY & BRISBANE HENCE MORE LISTENERS AND REVENUE WILL COME TO MSRIN MELBOURNEM SYDNEY & BRUSBANE
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So true, you have hit the nail on the head
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