The proposed A$4.2bn merger of Nine Entertainment and Fairfax Media will produce one of the largest players in the Australian media landscape. How successful will the merger be, and what does it mean for the wider media industry?
This deal is on the table thanks to the change in media ownership laws that removed the ‘two out of three’ media ownership rule which prevented one business from owning a TV network, radio station and newspaper in the same market. Accordingly, the deal is all about the digital assets. The combined entity will include Fairfax’s majority share of Domain, Stan, Nine’s FTA network and digital businesses as well as Fairfax’s mastheads and radio interests through Macquarie Media.
We are upbeat about the likelihood of the deal proceeding as announced. Government and ACMA support the deal, while the Opposition Leader has expressed his concern on the potential loss of journalist jobs. The ACCC intends to conduct a review of the deal with a 12-week consultation process with all stakeholders. There could be counter offers, but the probability remains low as Seven lacks the balance sheet depth while News Corp faces competition hurdles with its majority stake in REA. PE players are unlikely to play a part after a failed attempt in 2017.
We expect a relatively smooth integration as Nine and Fairfax have had a long history of partnerships, right from the 50:50 joint ownership of Stan to sharing audience data across their businesses. As ever, execution remains the key as simply putting two challenged businesses together will not drive long-term success.
The new Nine will have a stronger presence across a broader cross-section of traditional and digital media, from commercial TV, print and radio to digital classifieds and SVOD. The combined entity should be able to offer broader opportunities for advertisers and enable cross promotion across platforms and brands.