NZME, Stuff to renegotiate terms if appeal is successful
By Paul McBeth
March 6 (BusinessDesk) - Newspaper publishers NZME and Fairfax Media Group-owned Stuff will renegotiate the terms of their merger if they successfully appeal the High Court's rejection of their deal.
The merger agreement between the two companies has terminated, but if the media companies are successful in their Court of Appeal hearing in June, they will renegotiate the commercial terms of the deal, which strives to create a dominant newspaper publisher and aggregate two of the largest local online news presences in the country.
"Given changes in the businesses since 6 September 2016, when the merger implementation agreement was entered into, new commercial terms will need to be agreed for the merger to proceed," Auckland-based NZME said in a statement. "If the appeal is successful, the parties intend to negotiate a new agreement to realise the significant benefits of merging the operations of Stuff Ltd and NZME."
The deal comes just a fortnight after ASX-listed Fairfax said it planned to close or sell a third of its New Zealand mastheads, consisting of regional giveaway newspapers and agricultural publications, while NZME has signalled it wants to introduce subscription access to its website.
The media groups sought to merge their operations in response to the dominance of global internet companies Google and Facebook in attracting online advertising. Both local media firms have talked up the rapid growth of digital revenue, although their coffers are still dominated by traditional print advertising sales which are in decline.
The appeal court hearing is scheduled to run for four days starting on June 5.
The Commerce Commission rejected the merger over fears the public interest loss of media diversity outweighed the economic benefits of the deal. The High Court agreed that the commission could place significant weight on the loss of media plurality in making its decision.
Last November, First NZ Capital analyst Arie Dekker wrote in a note to clients that NZME shouldn't pay Fairfax $55 million if the appellate courts cleared the way for the merger, saying the Stuff portfolio's lack of diversity was more challenging than NZME, which owns radio assets.
"We think NZME is arguably in a stronger position to navigate change and that its business, including its print business, should arguably be valued more highly than Fairfax NZ," he wrote.
NZME shares last traded at 77 cents on the NZX and have dropped 13 percent so far this year, while ASX-listed Fairfax shares have dropped 8.3 percent this year to 71.5 Australian cents.