11 May 2016

NZ media giants in merger talks

12:38 pm on 11 May 2016

Media companies Fairfax and APN have told the New Zealand Stock exchange they are in talks about merging their New Zealand businesses.

If completed, the combined company would own a host of New Zealand's newspapers, including The New Zealand Herald, The Press the Sunday Star-Times and the Dominion Post, as well as the radio networks ZM, NewstalkZB, Radio Sport and Hauraki.

NZME also owns several North Island daily papers, while Fairfax's media portfolio includes several magazines such as Cuisine, TV Guide and NZ House & Garden, and the country's most-visited news website Stuff.co.nz.

Fairfax-NZME merger

If a merger goes ahead, the new company would own some of New Zealand's best known newspapers, magazines and radio stations. Photo: SUPPLIED

APN News & Media is proposing to demerge 100 percent of its New Zealand arm, NZME, and list it on the New Zealand stock exchange - with a secondary listing on the Australian exchange - in June.

APN confirmed it and Fairfax were in "exclusive discussions regarding the potential merger of their respective New Zealand businesses".

APN also planned to raise about A$180 million through a fully underwritten right issue.

The companies are aiming to complete the merger by the end of the calendar year.

Read the announcement here (pdf download)

The announcement follows a halt in trading in shares of APN announced on Monday by the company managers in Sydney.

It also follows years of financial strife that has led to widespread job losses in the industry in both Australia and New Zealand.

In Australia, Fairfax Media's once-profitable papers are now losing money and it has few assets in broadcasting which bring in revenue. The New Zealand business generated about 20 per cent of Fairfax's $A1.8 billion revenue in the year to June. But first-half earnings were down 12 percent and advertising revenue fell by 9 percent. Online revenue was up, but that didn't offset the continuing decline in print advertising.

The transaction is subject to regulatory consents including from the Commerce Commission.

If the merger was approved, Fairfax NZ's assets would be folded into the listed NZME later this year.

APN News & Media chief executive Ciaran Davis insisted merging with Fairfax in this country would be a positive thing for the media in New Zealand.

"If completed, the combined company will offer quality New Zealand journalism and a depth of news, sport and entertainment coverage across a diverse mix of print, digital and radio channels, creating opportunity to offer deliver improved, innovative offering to advertisers."

Mr Davis said both APN and Fairfax were committed to the merger.

A vital part of it would be to set up NZME as a separate entity from its Australian parents.

This would need shareholder approval but is being recommended by the company board.

Mr Davis said it would have the business and financial muscle to be a separate company, and would attract a good audience.

"2.3 million Kiwis engage with and use its content," he said.

"Revenue will be in excess of $430 million, with EBITDA close to $68 million. This is a strongly cash generative business."