NZME, Fairfax respond to merger draft determination

NZME and Fairfax have filed a submission in response to the Commerce Commission's draft determination to decline them merging operations. Photo / Jason Oxenham

NZME and Fairfax have filed a submission in response to the Commerce Commission's draft determination on the proposed merger between the two media companies.

In an announcement to the NZX, NZME said the media companies believed the Commission failed to properly take into account the diversity of opinions that will continue post-transaction in an increasingly converged digital world.

The draft determination from the Commission, released on November 8, proposed to decline the merger. The Commission said in its preliminary view the merger would likely substantially lessen competition in a number of markets, including the markets for premium digital advertising, advertising in Sunday newspapers and advertising in community newspapers in 10 regions throughout New Zealand.

NZME, owner of the New Zealand Herald, nzherald.co.nz, a range of regional newspapers, Newstalk ZB and a range of entertainment radio stations, will participate in the conference process scheduled to run December 6 to December 8 in Wellington.

The company won't seek NZME shareholder approval for the proposed merger until after the Commission's final determination is released, which is currently expected on or
before March 15, 2017.

NZME also told the NZX it would not exercise its option to acquire the New Zealand business of Adshel.

NZME and Fairfax NZ want to merge their operations and earlier this year applied to the Commerce Commission for authorisation.

According to a plan revealed in September, NZME intends to pay Fairfax Australia $55 million in the tie-up, with the Australian parent taking a 41 per cent stake in the merged group.

Under the proposal, Fairfax Australia would nominate two directors to the board of NZME, who would be appointed on completion of the merger.

In the year to June 30, Fairfax generated revenue of $350.3m and earnings before interest, tax, depreciation and amortisation (EBITDA) of $60.2m. Over the same period NZME generated revenue of $415.9m and EBITDA of $75m.

On a combined basis, NZME and Fairfax generated total revenue in the year to June 30 of $766.2m and total EBITDA of $135.2m.