Fairfax and Nine are merging

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  • Fairfax Media and Nine Entertainment are merging to create Australia’s largest integrated media player.
  • Hugh Marks, Nine’s CEO, will run the new combined business.
  • Nine shareholders with end up with 51.1% of the company.

Television network Nine and newspaper group Fairfax Media are merging.

The $4.2 billion combined business will include Nine’s free-to-air television network, a portfolio of digital businesses, including Domain, Stan and 9Now, as well as Fairfax’s mastheads such as the Sydney Morning Herald and The Age and radio interests through Macquarie Media.

The deal will see Nine shareholders with 51.1% of the new entity, which will be led by Nine’s current Chief Executive Officer, Hugh Marks.
The merged company will be called Nine.

The announcement from Nine said the Scheme Implementation Agreement will “establish Nine as one of Australia’s leading independent media companies”.

At Fairfax, CEO Greg Hywood talked about the “the continuation of our quality journalism” under the new combined management team and staff.

Three current Fairfax Directors will be invited to join the board of the combined business, which will be chaired by the Nine Chairman, Peter Costello, and include two further current Nine directors.

Fairfax shareholders will get 0.3627 Nine shares for each Fairfax share and $0.025 cash. This implies a 21.9% premium to Fairfax’s closing price yesterday of $0.770 and a 22.6% premium to Fairfax’s one month VWAP (volume weighted average price) to July 25 of $0.766.

The merger is expected to deliver annualised savings of at least $50 million over two years.

The Directors of Fairfax will unanimously recommend that shareholders vote in favour of the scheme.

Costello said: “Both Nine and Fairfax have played an important role in shaping the Australian media landscape over many years. The combination of our businesses and our people best positions us to deliver new opportunities and innovations for our shareholders, staff and all Australians in the years ahead.”

Fairfax’s Chairman Nick Falloon said: “The Fairfax Board has carefully considered the Proposed Transaction and believes it represents compelling value for Fairfax shareholders. The structure of the Proposed Transaction provides an exciting opportunity for our shareholders to maintain their exposure to Fairfax’s growing businesses whilst also participating in the combination benefits with Nine.”

Nine says the combination of the businesses unlocks the “potential for significant value creation” by combining the content, brands, audience reach and data across the respective businesses, including majority owned group companies Domain and Macquarie Media.

The television network, after completing the deal, will review the scope and breadth of the combined business, to align with its strategic objectives and its digital future.

Nine CEO Hugh Marks says Nine’s strong operating momentum has allowed investment 9Now, Digital Publishing and streaming media player Stan.

“This merger with Fairfax will add another dimension, creating a unique, all-platform, media business that will reach more than half of Australia each day through television, online, print and radio,” he says.

“For our audiences and employees, this means we will continue to be able to invest in premium local content across news, sport, entertainment and lifestyle.

“For our agency partners and advertisers, we will provide an expanded marketing platform with even greater advertising solutions underpinned by a significantly enhanced data proposition.

“For our shareholders, the merged business will generate an increasing percentage of its earnings from high growth digital businesses that provide a compelling opportunity to generate both incremental value and cash flow into the future.”

Fairfax CEO Greg Hywood says the deal reflects the success of Fairfax’s transformation strategy.

“The combination with Nine provides an exciting opportunity to continue to drive incremental value well into the future,” he says.

“We are confident that the strength of the combined management team and staff will ensure the continuation of our quality journalism.”

Hywood told staff, in an email this morning, that it is business as usual at Fairfax.

“Over the last eight years Fairfax Media has gone from being at the mercy of the non-stop global media revolution to being best of its breed,” he says.

“And that is why Nine wants to merge their business with ours.

“Working through the detail will take a number of months but you can be assured that there will be plenty of Fairfax Media DNA in the merged company and the Board.

“I would like to thank everyone for their contribution to Fairfax. At the end of this process the business will be a media company of scale, depth of offering and digital capacity and opportunities like no other in our region.”

At Nine, Marks told staff that the deal was “genuinely quite breathtaking”.

“The ground-breaking merger — harnessing the strengths, assets, quality and reach of two of the country’s most famous industry brands — is another highly significant step in the evolution of Nine’s business into one of the most powerful media orghanisations in the country,” he says.

Nine is being advised by Jefferies as financial adviser, and Ashurst as legal counsel.

Fairfax is being advised by Macquarie Capital as financial adviser, and King & Wood Mallesons as legal counsel.

Disclosure: Business Insider is published by Allure Media, a wholly owned subsidiary of Fairfax Media.

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