NZME, Fairfax Media merger plan: What you need to know

By Jamie Gray

NZME and Fairfax Media have filed an application to the Commerce Commission to merge their New Zealand media businesses.

In their submission, the parties said the decision by Fairfax and NZME to merge was in response to the transforming media landscape.

They said the change has been particularly felt in New Zealand, where internet penetration and smartphone ownership rates are among the highest in the world.

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The proposed merger, which would create the country's biggest standalone media company, was put forward early this month. Separately, APN plans to demerge NZME - which publishes the NZ Herald - and list it as a standalone unit in July.

Why merge?
The decision by Fairfax and NZME to merge is in response to the transforming media landscape. The change has been particularly felt in New Zealand, where internet penetration and smartphone ownership rates are among the highest in the world.

Will their be an impact on competition?
New Zealand is among the world leaders in internet penetration and smartphone ownership, with smartphones now being the key device for accessing digital news/information, and social media usage. The parties estimate, like in Australia, at least 40 per cent of people in New Zealand access news and information through a social media platform and nearly 50 per cent through a search engine, in addition to other sources of news/information.

What will the new structure look like?
The structure of the merged business has not been finalised. Both companies are approaching the transaction as a merger of equals. Fairfax is expected to have a shareholding of under 50 per cent in NZME and is expected to be the single largest shareholder. The application details the current proposal, which is that NZME would acquire Fairfax assets or shares for a mix of new shares in NZME and cash.

What happens if the merger does not go ahead?
Fairfax and NZME will continue to operate as two independent companies.

What happens next?
The Commerce Commission will investigate the proposed merger, receive submissions from interested parties and update its website with any public submissions. APN shareholders will vote on the demerger plan on June 16. The parties expect the Commission to publish a proposed time frame for considering the application in the next 10 days. A final decision is expected to be some months away.

What must the Commission decide?
The Commission must decide whether the competition that is lost in the market when the two businesses merge is substantial. This is done by economic and legal analysis under a set process. For the merger to proceed, it has to be approved by the Commission, and is subject to other approvals, including approvals from the boards of APN/NZME and Fairfax Media.

How will a merger support quality journalism?
The parties said the merger would deliver enhanced quality and diversity of editorial offering and would allow them to invest in the depth and breadth of local journalism. "The merger will therefore allow us to invest in content to better compete for consumers' attention against global and local news and information sources," they said.

What needs to happen first?
The proposed APN/NZME demerger will be voted on by APN shareholders on June 16. If it is approved, NZME will be listed separately on the NZX and ASX. NZME expects this to happen by July. The APN/NZME demerger is running in parallel with the merger process.

- NZ Herald

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