Nine Entertainment and Fairfax Media have defended their $2.2 billion merger deal, saying it will build a stronger business and be good for journalism.
But the surprise acquisition of Fairfax by Nine, announced on Thursday, has raised immediate concerns about its impact on media diversity and editorial independence at 177-year-old Fairfax, while potential job cuts have also not been ruled out.
Nine will acquire Fairfax by the end of the year, creating a giant Australian media business spanning television and digital news, free-to-air TV, radio, on-demand video streaming and real estate listings.
Nine CEO Hugh Marks, who will head the new entity and spoke to media and analysts alongside Fairfax CEO Greg Hywood, said the deal creates a strong business able to reach more than half of the Australian population through TV, online, print and radio.
“Greg said this is good for journalism; I think it’s good for anyone in frontline content creation because, again, this business will be in a very strong position to compete,” Mr Marks said.
“The people that have come in and changed our world – the big tech players – our ability to compete with those tech players is to do it through content. Content will be the future of this business.”
The Media, Entertainment and Arts Alliance called on the ACCC to block the deal, saying it would be “bad for democracy” and harm media diversity in an already concentrated market.
Asked if jobs would go as a result of the deal, Mr Marks told journalists: “There’s never any guarantee in this world, this is a commercial organisation but certainly the principles of this deal … will enable us to continue to invest in content”.
The merger is expected to deliver at least $50 million in annual cost savings on back-end operations for the broadcaster and the publisher, both of whom have faced increasing competition and dwindling advertising revenue.
The Fairfax board will recommend shareholders vote in favour of the cash and scrip deal, under which they will receive 0.3627 Nine shares and 2.5 cents for each share.
If the transaction goes ahead, Nine will own 51.1 per cent of the combined entity, which will own Netflix rival Stan, and a 60 per cent stake in real estate listings business Domain.
Mr Marks said the new business, to be called Nine, will offer advertisers a bigger marketing platform and enhanced access to consumer data, while shareholders gained a business that gains more of its earnings from “high growth digital businesses”.
Communications Minister Mitch Fifield said the deal looks to be legal under new media laws aimed at ensuring Australian media businesses aren’t pushed out by international competitors.
While Fairfax shares jumped 8.4 per cent to 83.5 cents on Thursday, Nine shares slid 10.3 per cent to $2.26.
Media strategist Steve Allen, of Fusion Strategy, said the decision to drop the Fairfax name under the deal was “insanity” because it had value to subscribers and media buyers.
“I think there is value they have discounted in this deal with the way they have handled this deal in the Fairfax name,” he said.
Mr Allen said the merger would not improve the fortunes of print media.
“Media agencies have largely turned their back on print: month after month there are double-digit declines,” he said.