OIO consent granted for NZME-Fairfax merger

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The Overseas Investment Office has granted consent to the proposed merger of media companies NZME and Fairfax NZ.

Media company NZME, publisher of the Herald and owner of Newstalk ZB, plans to pay Fairfax Australia $55 million as part of the proposed merger with its rival.

The merger remains conditional on NZME shareholder and New Zealand Commerce Commission approval, among other matters.

The companies released details to the NZX on September 9 saying NZME intends to pay Fairfax Australia $55 million, with the Australian parent taking a 41 per cent stake in the merged group.

A decision from the Commerce Commission is expected by March next year.

The media groups said that Fairfax NZ's significant New Zealand audience reach was complementary to that of NZME, with the combined business reaching about 3.7 million New Zealanders.

NZME chief executive Michael Boggs said the company would soon be in a position to put the merger proposition to its NZME shareholders around October or November.

"The merger will present opportunities for NZME to significantly enhance our integrated offerings to both our audience and our advertising clients," he said in a statement.

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

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

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

"NZME and Fairfax have undertaken a review of expected transaction synergies, and as a result of this review, expect that the combined business could generate significant synergies," they said.

The realisation of those synergies would require one-off costs to be incurred by the combined business. In order to fund its obligations under the merger agreement, NZME expects to increase its bank facilities to $250 million through a syndicated bank facility.