NZME-Fairfax merger not impossible: analysts

A merger between the New Zealand operations of NZME and Fairfax Media would require Commerce Commission approval, say analysts. Photo / Warren Buckland

A merger between the New Zealand operations of NZME and Fairfax Media would require Commerce Commission approval, but the likely competition issues would not be insurmountable, say analysts.

The Australian newspaper said Fairfax and the owner of NZME - APN News & Media - had held talks, speculating that the media companies may soon merge their New Zealand operations.

APN, which owns New Zealand Herald publisher NZME, issued a trading halt notice to ASX, pending an announcement due before the company's annual meeting in Sydney tomorrow.

In addition to the Herald NZME owns several provincial newspapers and radio stations, including Newstalk ZB and Radio Hauraki. APN News & Media abandoned plans for an initial public offering of its NZME division in February.

A Fairfax statement said: "Fairfax continues to explore options for all its businesses including Fairfax New Zealand, but at this time there is nothing to disclose."

Analysts said the fact that Fairfax had not gone into a trading halt indicated the merger talk was ill-founded.

Speculation also circulated last month that APN would launch an in specie share distribution plan to split off NZME shares, which would allow APN shareholders to sell or retain their exposure to New Zealand.

The Australian said APN was expected to undertake a capital raising in excess of A$200 million in conjunction with a New Zealand demerger.

APN shares last traded at A63c on the ASX.

Mark Lister, head of private wealth research at Craigs Investment Partners, said approval of a NZME-Fairfax merger from the Commerce Commission should not be ruled out.

"I don't think that it would be clear-cut that they would stand in the way of a merger because the industry is still quite fragmented in many ways.

"There are many avenues for advertising and media these days - there are still other players in this space through various other channels," he said. "You can never rule anything out, especially in an industry that is going through so much change."

Shane Solly, portfolio manager and research analyst at Harbour Asset Management, said merging the two New Zealand operations would be a challenge from a competition perspective.

"It depends on how [a deal] is cut," Solly said. "It would depend on what was in, and what was out."

In February, Fairfax reported a 4.2 per cent increase in first-half profit to A$26.3 million as revenue edged up 1.6 per cent to A$958 million.

Fairfax Media publishes the Sydney Morning Herald and the Australian Financial Review. Media reports, including in the Australian, said Fairfax Media wants to spin off its New Zealand business, which includes mastheads the Dominion Post and the Press.

Last week, Fairfax Media flagged the idea of ending weekday print editions of the Sydney Morning Herald and the Age, with only digital editions during the week and print editions for weekends due to falling ad revenue.

The Australian said a Fairfax spin-off could involve a demerger of shares to existing shareholders, an IPO or a trade sale.