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Fairfax's New Zealand newspaper assets - such as the Dominion Post and the Press - are now more protected from a hostile takeover by the likes of Australian media moguls James Packer and Kerry Stokes, industry sources say.
Their comments follow the announcement of the merger of Australian
media giants Fairfax and Rural Press, which the sources say is unlikely to spark a shakeup of newspapers here.
The move comes ahead of changes to Australian media ownership laws in February which have put the spotlight on Fairfax as a takeover target.
More than A$11.6 billion ($13.3 billion) of media acquisitions have been announced in Australia in the seven weeks since the laws removing limits on media ownership were approved, twice as much as in the past five years. These recent deals are seen as positioning companies for the new regulatory regime.
The Fairfax-Rural Press consolidation - which will create a A$9 billion ($10.3 billion) entity - means six Rural Press consumer publications in New Zealand will be folded into Fairfax New Zealand operations.
They include Straight Furrow, Ag Trader, the Dairyman, Horticulture News, Lifestyle Farmer and New Zealand Grape Grower.
The New Zealand magazine industry is dominated by Fairfax Magazines, James Packer's Australian Consolidated Press and APN's New Zealand Magazines.
Rural Press is a significant player among Australian regional media. It has 200 newspapers, 15 websites and nine radio stations.
In the past there has been speculation that Rural Press might have been interested in the New Zealand assets of Fairfax if they were ever sold.
But sources said New Zealand operations were now delivering good margins and - excluding online auction site Trade Me - 35 per cent of operating profits.
That made it highly unlikely they would now be sold separately, one source said.
Yesterday, Fairfax chief executive David Kirk said the merger would create "Australasia's largest integrated metropolitan regional and rural print and digital media company".
He said the companies had complementary interests.
Fairfax has lacked a large cornerstone shareholder through which a board could oppose a significant takeover bid, making it vulnerable to cash rich media companies and private equity firms.
Last month, Rupert Murdoch's News Corp took a 7.5 per cent strategic stake in Fairfax, while Kerry Stokes' Seven Media Group - which is tipped as a likely buyer of the company - has also bought around 3 per cent.
The merger with Rural Press also marks the symbolic return of the Fairfax family, whose ancestors established the company in 1841.
They exited the Fairfax company in the wake of a junk bond disaster during the Warwick Fairfax era.
Through their company Marinya Media, John B. Fairfax, Tim Fairfax and the family bought into Rural Press. Marinya still holds 52 per cent of Rural Press.
Under the deal announced yesterday, Rural Press shareholders will own 14 per cent and Rural Press will be entitled to two places on the Fairfax Board.
Rural Press chairman John B. Fairfax acknowledged that the stake made the company less vulnerable to unwanted takeover interest.
He also said that if invited he would not resist the opportunity to be on the board. Fairfax said it would not oppose such a move.
Rural Press shareholders, who will vote on the proposal in March or April, have the option of getting two Fairfax shares and A$3.30 cash, or 2.3 Fairfax shares and A$1.80 cash for each of their shares.They will also receive a 57c dividend.
Fairfax shares dropped A16c cents to close at A$5.05 yesterday as the merger removed the prospect of a hostile takeover and bidding war for the company. Rural Press shares rose A$1.66 to close at A$13.41.
Media moves
* Australian media companies Fairfax and Rural Press plan to merge.
* The combined company will be worth around $A9 billion.
* Fairfax NZ takes over six Rural Press publications in NZ.
* The merger marks the return of the Fairfax family to the top echelons of the company.
* Rural Press is a significant player in Australian regional media with 200 newspapers, 15 websites and nine radio stations.
- Additional reporting Bloomberg