Nine’s merger with Fairfax: A Mediaweek Q&A session on Australia’s biggest-ever media deal

Is this a takeover or a merger? What will happen to stan? James Manning takes a look.

Compiled by James Manning

• Sector consolidation explodes with Nine-Fairfax merger announcement
• Nine CEO Hugh Marks emails staff about Fairfax merger: ‘Not about cost reductions’
Video: Hugh Marks and Greg Hywood on the Nine / Fairfax merger

Is this a takeover or a merger?

It is a takeover in that Nine takes control of Fairfax and the Fairfax name is retired. There will be no creation of a new joint entity.

It is a merger in that it is the combination of two almost equal partners, and there is agreement from both parties they should combine.

How long have the partners been working on the deal?

Greg Hywood said on Thursday morning they were approached by Fairfax in early July with a proposal. However, you would think there would have been informal discussions over a longer period in the past. Nine and Fairfax have been partners in Stan since 2014. Within Nine Entertainment it was called Project Wolfgang.

Will Nine keep printing Fairfax newspapers seven days a week?

Nine Entertainment Co chief executive Hugh Marks said yes on Thursday. Regional papers’ future was less clear. “That is an area of detail I have yet to get to,” said Hugh Marks on Thursday. He added: “If together they help overall revenue they should be okay.”

What role will Fairfax CEO Greg Hywood have in the new company?

He will continue leading Fairfax until the deal completes, which will be close to the end of 2018. He confirmed to staff on Thursday he will then depart. Nine has not yet revealed which Fairfax representatives would join the Nine board.

Is this the biggest media deal ever in Australia?

No. Terry McCrann has reminded people Kerry Packer got $5.5b for Nine in 2006. Twelve years later Nine plus Fairfax Media is valued at $3.8b.

I have a few Fairfax shares. What will I get from Nine?

Fairfax shareholders will receive consideration comprising:

0.3627 Nine shares for each Fairfax share held (Scrip Consideration)

$0.025 cash consideration per Fairfax Share (Cash Consideration), together, Aggregate Consideration.

The Aggregate Consideration implies a:

21.9% premium to Fairfax’s closing price on July 25, 2018 of $0.770

22.6% premium to Fairfax’s one month VWAP to July 25, 2018 of $0.766.

Will cost savings include staff cuts?

Yes – there will be a reduction at management levels, and some of the “back office” functions will be combined. That will mean things like finance, HR. The merger statement said this morning: The merger is expected to deliver annualised pro-forma cost savings of at least $50m, which will be fully implemented over two years.

As to claims about journalism job cuts made by the MEAA (see more on that below), Hugh Marks said the MEAA is looking at it the wrong way. “We want an organisation that can support creation of content. We want as much money as we can get to invest in content.”

Will the new Nine-owned newspapers be full of promotions for Nine programming and digital properties?

Eventually, quite possibly. Nine has used its own assets including A Current Affair to help promote Stan. Fairfax has promoted Stan via sponsored content and newspaper wrap-arounds.

Will the Nine-News Corp Australia JV with the Sky News Business channel proceed?

Hugh Marks said yes when asked on Thursday morning. The channel is due to be rebranded Your Money under the leadership of Kylie Merritt with a launch date anticipated to be late September.

The only potential disruptor here is that Merritt is being mentioned as a potential replacement for departing Sky News Australia boss Angelos Frangopoulos, which could leave the new Your Money without a leader before it launches.

Kylie Merritt and David Ash

What does the Media, Entertainment and Arts Alliance think of the merger?

Not happy. This statement was issued by the journalists union shortly after the deal was announced:

Nine’s takeover of Fairfax will be bad for Australian democracy and diversity of voices in what is already one of the most concentrated media markets in the world, says the union for Australian media workers.

The Media, Entertainment & Arts Alliance calls on the ACCC to block the takeover.

MEAA is seeking commitments from Nine and Fairfax that the Fairfax Charter of Editorial Independence is upheld under any merger.

Marcus Strom, president of MEAA Media, said: “Today’s takeover announcement is the inevitable result of the Coalition Government’s short-sighted and ill-conceived changes to media ownership laws that were always going to result in less media diversity. With ongoing inquiries into the independence and long-term viability of quality journalism under way, the ACCC must block this takeover.

“This takeover reduces media diversity. It threatens the editorial independence of great newsrooms at Nine, The Sydney Morning Herald, The Age, Canberra Times, Illawarra Mercury, Newcastle Herald, Macquarie Media and more – right around the country. It harms the ability of an independent media to scrutinise and investigate the powerful, threatens the functioning of a healthy democracy, and undermines the quality journalism that our communities rely on for information,” Strom said.

“Nine and Fairfax must explain how they intend to defend the integrity of independent quality journalism in any combined entity.”

MEAA will demand that all existing employment conditions and entitlements are protected and retained for all workers at both companies, and that existing industrial agreements are respected.

Strom said: “Any further cuts to editorial journalism at Nine and Fairfax would bite into the muscle, bone and soul of the newsroom. The proposed savings of $50m in two years should come from trimmings to bloated executive salaries and from any back-office rationalisation.”

MEAA will be urgently convening meetings of its members at all Fairfax Media newsrooms to discuss the impact of today’s announcement.

What happens to Stan?

The streaming business will continue to grow with perhaps Nine Entertainment Co wanting to fast-track growth with increased investment now it owns 100% of the business. There could also be some content synergies with Nine and Stan sharing content acquisitions and commissions.

Will Nine get involved with 2GB and 3AW?

Nine already has strong links to the stations – in particular 2GB where hosts Ross Greenwood and Ben Fordham also have TV jobs at Nine. Ray Hadley is also a regular on Nine’s Today show and calls NRL on the TV for Nine.

3AW’s Tom Elliott asked Nine CEO Hugh Marks if he would leave the Melbourne station alone. “3AW is a brilliant station that has performed very well,” said Marks. “We hope you will continue what you are doing. I have no plan to get involved in 3AW, just as I don’t get involved in the Nine newsroom.”

Will this help the newly launched Macquarie Sports Radio?

It should. The stations in Brisbane, Sydney and Melbourne should now have access to exclusive content from the sports desks of both Nine – Wide World of Sports – and The Age and The Sydney Morning Herald. It may take some time to sort all this out though.

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