Nine Entertainment shares continue to slide a day after the company moved to acquire Fairfax Media, with one analyst expressing doubt over how the merged group will fare against digital giants such as Google.
At 12:30 AEST on Friday, Nine shares were down 1.55 per cent, at $2.22 after falling 10.3 per cent to $2.26 by the end of trade on Thursday.
Morningstar senior analyst Brian Han said he was ‘ambivalent’ about the deal, calling the potential earning benefits ‘marginal’ at an expected two per cent contribution to earnings per share for Nine.
In a research note, Mr Han said long term gains would be dependent on how the new Nine – able to reach more than half of the Australian population through TV, online, print and radio – would fare against digital disruptors.
‘Longer-term value accretion remains hostage to how the merged entity competes against the relentless onslaught of digital disruptors such as Google, Facebook, and Netflix,’ Mr Han said.
Digital media reaps about 50 per cent of Australian advertising revenue, compared to 27 per cent five years ago, he noted.
Fairfax shares, meanwhile, were down 2.1 per cent, at 82 cents in afternoon trade after jumping 8.4 per cent to 83.5 cents on Thursday.
Mr Han said Nine’s cash and scrip offer valued Fairfax at 84 cents a share – about 20 per cent above Morningstar’s fair value estimate of 70 cents for the stock.
‘Little wonder the (Fairfax) board will unanimously recommend the proposal to shareholders,’ he said.
Mr Han said it was likely the deal will be approved by the ACCC.
Completion of the merger is expected by the end of 2018.