ACCC approves merger of Fairfax and Nine

The ACCC says it will not oppose the $4bn merger of Nine and Fairfax, even though it will likely reduce competition.

As expected, the ACCC has approved the Nine-Fairfax merger. Pic: AAP

Australia’s competition watchdog has approved Nine Entertainment and Fairfax Media’s $4 billion merger, as expected, as traditional media companies grapple with threats from tech giants like Google and Facebook.

The Australian Competition and Consumer Commission said it examined several markets that would be affected by the merger, and the impact on news and competition.

“While the merger between these two big name media players raised a number of extremely complex issues, and will likely reduce competition, we concluded that the proposed merger was not likely to substantially lessen competition in any market in breach of the Competition and Consumer Act,” ACCC chair Rod Sims said in a statement.

“This merger can be seen to reduce the number of companies intensely focusing on Australian

news from five to four,” he added.

“Post the merger, only Nine-Fairfax, News/Sky, Seven West Media and the ABC/SBS will employ a large number of journalists focused on news creation and dissemination.”

However, the growth in online news providers is likely to ensure fierce competition.

“With the growth in online news, however, many other players, albeit smaller, now provide some degree of competitive constraint. These include, for example, The Guardian, The New Daily, Buzzfeed, Crikey and The Daily Mail,” Mr Sims said.

The ACCC decision was welcomed by Nine chief executive Hugh Marks, who will lead the enlarged group if the deal is approved by Fairfax shareholders, and by Fairfax chairman Nick Falloon.

“It is clear to us the ACCC were thorough in their considerations of the many submissions they received and we welcome this rigorous process, as this is first merger to take advantage of the government’s media law reforms,” Mr Marks said.

“It is a clear acknowledgment of the changing competitive landscape in our industry, where the ability to compete across a variety of platforms and to engage different audiences is key.”

In a note to staff, Mr Marks described the ACCC’s decision as a “significant milestone” as it now focuses on securing the backing of Fairfax shareholders on November 19.

“We are now moving at a rapid pace developing plans and processes for the smoothest possible transition. Integrating two media businesses with high public profiles and rich histories is not a simple task.

“There will be some changes to leadership, locations, corporate teams and systems as we proceed to bringing these two great organisations together,” Mr Marks said.

Nine will own 51.1 per cent of the enlarged company, with Fairfax shareholders hold the remaining 48.9 per cent.

The enlarged group will boast Nine’s free-to-air TV network, digital businesses Domain, Stan and 9Now, as well as Fairfax’s mastheads and its 54.5 per cent stake in radio network Macquarie Media.

Mr Falloon, who will be deputy chair of the enlarged company, said the merger will “deliver a “stronger, digitally-focused media organisation with impressive multi-platform audience reach”.

Fairfax Media CEO Greg Hywood, left, and Nine CEO Hugh Marks. Pic: AAP

Fairfax CEO Greg Hywood, who is expected to leave once the deal is completed, told staff in a note today that Nine’s takeover would involve a large number of staff but that they should remain focused on audiences and advertisers.

“And I have no doubt our journalism will not skip a beat.

“We are very focused on making it a successful transition. From the outset we believed this merger was right for our future because it builds a stronger multi-platform media organisation, allows continuing investment in our independent journalism, and gives us more diverse independent brands operating in complementary channels, working alongside each other,” Mr Hywood said.

The merger is forecast to deliver annual cost savings of at least $50 million.

Nine said in the merger scheme book, which was released on October 12, that it would review its staffing needs following the completion of the deal. The group also appears lukewarm about retaining Fairfax’s rural, regional and agricultural newspapers.

The ACCC’s ruling was also positive news for investors, with Fairfax and Nine shares up 1.9 per cent to 63.7 cents and 1.8 per cent to $1.71, respectively, on the ASX midmorning.

Australia’s biggest media union, the Media Entertainment & Arts Alliance, is against the merger, and has warned that any further cuts to editorial staff at the enlarged group would be alarming.

The MEAA said ACCC’s decision was a “body-blow to media diversity”, and the start of more big deals that will hurt news coverage and jobs.

“Given the ACCC’s failure to take the concerns raised by MEAA and the public into account, we will be making a robust case to the new owners of Fairfax to sign a new charter of editorial independence, guarantee there will be no closures of newsrooms or titles, especially in regional areas, and maintain existing wages, entitlements and employment conditions,” MEAA CEO Paul Murphy said.

The performance of Nine and Fairfax was very different in the financial year ended June 30.

Nine swung to a net profit of $209.7 million, on the back of improving TV operations and profit from the sale of properties. That compares with a net loss of $203.4 million last year, which was hit by a big writedown on its TV broadcast licences and a provision to get out of its Warner Bros contract.

Fairfax posted a net loss of $63.8 million, hit by its regional and New Zealand businesses, plus restructuring and redundancy costs. That compared with a net profit of $83.9 million last year.

Under the deal, Fairfax shareholders will get a mix of cash and scrip, including 0.3627 Nine shares and 2.5 cents for each Fairfax share held. This implied a 22 per cent premium to Fairfax’s share price of 77c the day before the deal was announced.

If all goes smoothly with Fairfax shareholders, and subsequent court approval, the merger will be completed on December 7, Mr Marks told staff.