Head of Business for NZME

NZME, Fairfax in merger talks to create media giant

• Exclusive merger talks underway to create new NZ publishing empire
• NZME will demerge from its Australian parent APN
• NZME will list on NZX and ASX in late June
• Commerce Commission approval to be sought for merger between NZME and Fairfax NZ
• If the merger is approved, Fairfax NZ's assets will be folded into the listed NZ company NZME later this year
• Fairfax will take a shareholding in the listed NZME assuming commission approval is granted.

APN News and Media and Fairfax Media are in "exclusive talks" to fold their New Zealand operations - NZME and Fairfax NZ - into a major listed NZ media company.

The new company will bring two major New Zealand publishing empires together, straddling nation-wide titles like the NZ Herald and the DomPost, a slew of regional newspapers, two major websites - nzherald.co.nz and stuff.co.nz plus the Radio Network, which includes Newstalk ZB, Radio Sport, a host of music stations, iHeart Radio and GrabOne.

NZME has roughly 1800 fulltime staff while Fairfax has 1500.

The deal is subject to shareholder and regulatory approvals, including the Commerce Commission.

The proposal sees NZME de-merged from its Australian parent APN, and listed on the NZX and ASX in late June.

It would be the only listed NZ media company on the NZX and would be expected to feature within the NZ50 when Fairfax NZ's assets are folded in once the approval process is finalised.

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Salt Funds Management managing director Matt Goodson said the addition of a large media company to the NZX would be welcomed by the sharemarket.

"We would absolutely welcome any listing of NZME in New Zealand," he said. "It's another company and another choice (for investors) and it will be fascinating to see what synergies can be brought if the discussions between APN and Fairfax lead anywhere," he said. Salt is one of New Zealand's biggest fund managers, with $1.45 billion in funds under management.

APN also announced it would raise about A$180 million through a fully underwritten right issue. The company is also proposing to undertake a one-for-seven share consolidation. Proceeds from the offer will be used to repay a portion of APN's corporate debt and, if the demerger proceeds, "to facilitate the establishment of appropriate capital structures for APN and NZME".

Green Party MP Gareth Hughes says a proposed merger between NZME. and Fairfax is bad news for a broad media environment and shows there is a need for regulation to oversee media ownership issues.

Mr Hughes said a diverse and competitive media was important for democracy and the Commerce Commission was not allowed to consider issues such as the unique role of media companies.

"Many other countries have specific rules that prevent media monopolies from forming, but New Zealand doesn't. I think it's unlikely these Australian-owned media companies would even dream of proposing a virtual monopoly over newspapers in their home country, under current rules there."

He said countries such as Australia and the United Kingdom had criteria to oversee ownership rules, digital convergence issues, and local content quotas through Australia's ACMA and UK's OfCom.

"The people who lose out from a newspaper merger will be the journalists whose jobs are cut and citizens who want a choice about where they get their news from."

APN CEO Ciaran Davis said the merger of NZME and Fairfax's NZ business would provide "an exciting opportunity for our shareholders - particularly our new Zealand shareholders - to participate in the creation of a leading media business for New Zealanders".

NZME CEO Michael Boggs added "NZME has already demonstrated the significant benefits that can be achieved by combining news media, digital e-commerce and radio operations.

"This merger offers a compelling opportunity to develop these important media brands in providing relevant and innovative news, sport and entertainment content for New Zealanders long into the future."

The proposed NZME board will be chaired by former banker Sir John Anderson and include advertising supremo Peter Cullinane and Carol Campbell among its directors. Both Sir John and Cullinane are directors of NZME's parent company APN.

It is expected other directors will be added once merger approval is given.

Fairfax chief executive Greg Hywood said: "This is an important opportunity for all of our shareholders to be part of the future of content and journalism in New Zealand. The merger would enhance the position the businesses are in to continue to deliver high quality, local content to audiences now and in the future."

Fairfax NZ CEO Simon Tong said "As the tastes and habits of media consumers continue to evolve, so too do the needs of advertisers looking to reach these audiences. The depth and breadth of the combined business would be a win for audiences, and also enable us to create innovative solutions for advertisers based on the best of both of us."

The companies say their NZ businesses are "to a large extent" complementary, adding the expanded network of brands and channels will create an opportunity to deliver improved, innovative offerings to advertisers and audiences.

As a first step, APN shareholders will vote on the proposal to demerge NZME from its parent company at a special meeting on June 16.

If the proposal is approved, NZME will be listed on the NZX and ASX in late June.

In his email to staff, Boggs says the demerger will see NZME become a standalone New Zealand company listed on the NZ stock exchange with its own NZME board.

"I see this as a natural progression for us following the transformation of our business over the past year.

While APN and Fairfax Media are promoting the NZ merger plan as the "coming together as equals" it is subject to Commerce Commission approval.

An application is expected to be filed in the next four weeks. It will be "business as usual" for both companies until the commission gives its approval.

Labour Party commerce spokesman David Shearer said a merger would negatively affect media freedom in New Zealand.

"We have two major print media networks who are competing against each other, which is always good, and two massively popular websites, of the Herald and Stuff, competing against each other.

"I can't see any good coming out of merging this so that we have effectively one newspaper network for the entire country.

"It puts an enormous amount of power in the Fourth Estate into the hands of very few people and I hope the Commerce Commission sees it that way. Going on past records, I'm not that confident."

Broadcasting Minister Amy Adams said it was not for her to comment on the merits of mergers between private companies.

But she suggested that the Government would not stand in the way of a merger between NZME and Fairfax.

"Ultimately it's for the Commerce Commission to decide on competition issues."

Ms Adams said "convergence" was having a "dramatic impact" on the telecommunications, media and entertainment sectors.

"New Zealanders want to access their content in different ways and on multiple platforms, and businesses across these sectors face a number of challenges as they adapt," she said.

"The distinctions between print, radio, television and online news are fading. Generally, digital convergence is giving New Zealanders greater access to content than ever before.

"Through platform convergence, previously distinct media platforms compete with each other at a level much greater than ever before - with television companies publishing editorials, for example, or newspaper websites running video clips. "

The Coalition for Better Broadcasting said the proposed merger would create a monopoly with too much market power in the newspaper sector.

"With the exception of the Otago Daily Times, a merged NZME and Fairfax company would control all the major metropolitan and regional dailies as well as one half of the commercial radio duopoly," the Coalition said in a statement.

"Such a concentration of market power, editorial control and agenda-setting influence in a single company poses a direct threat to the news media's function as Fourth Estate."

NZME milestones:

• June 2016 - NZME to be listed on NZX and ASX following its demerger from APN;
• December 2015 - NZME moves to new Auckland HQ with a fully-integrated newsroom;
• September 2014: NZME prepares for IPO and NZX listing; the option was later shelved;
• September 2014 - NZME is launched to wrap APN's New Zealand print, radio and digital assets, The Radio Network and digital business GrabOne into one company'
• December 2001 - APN acquires 100 per cent of Wilson & Horton from Independent - the assets include the NZ Herald; regional daily newspapers, and a stake in The Radio Network
• 1998 - Tony O'Reilly's Independent moves to 100 per cent of Wilson & Horton;
• 1996 - Tony O'Reilly's Independent buys Horton family's interest in NZ Herald publisher Wilson & Horton

Read a statement on the merger talks here:

- NZ Herald

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