Fairfax New Zealand and NZME, the country's dominant newspaper publishers, downplayed the size of likely job cuts among frontline journalists if the regulator makes an about-face and approves a merger.
In a cross-submission on the Commerce Commission's draft determination shooting down the deal, NZME and Fairfax said redundancies are an economic reality facing both businesses, and that job losses will be at a faster pace and may be focused in the regions if the merger isn't allowed. The companies said while no final decisions had been made, of the $136.5 million to $218.7m of quantified benefits over five years in the draft decision, PwC's model was based on just 10 per cent to 13 per cent coming from "a reduction in duplicated journalist roles".
Editorial savings were one of 11 categories where the merger was expected to deliver a benefit alongside sales, marketing, printing, procurement and distribution, management, information technology, premises, community rationalisation, Sunday rationalisation, merger transactions costs, and finance costs, they said.
"NZME and Fairfax reiterate that in the absence of the merger, the relevant counterfactual is that both businesses will be unable to maintain their current quality and production levels and remain financially viable," they said. "Therefore there is likely to be material reduction in frontline journalism and the production of print publications."
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The commission, which is due to make a final decision on the merger in March next year, held a two-day conference on the matter in Wellington last week. The regulator is of the view that authorising the deal would create too much concentration of power and influence. The Commerce Act empowers the regulator to authorise anti-competitive deals provided it's satisfied "the acquisition will result, or will be likely to result, in such a benefit to the public that it should be permitted".
The media companies claim they have more support backing the deal than those opposing it, citing submissions on the decision by more than 30 of their own editorial staff, the Gisborne Herald's publisher, advertising industry body CAANZ, and communications consultancy Flame Tree Media.
Fairfax NZ and NZME said if the deal is knocked back there will still be fewer voices in the sector because "plurality cannot exist unless there is a way to fund it".
Fairfax Media chief executive Greg Hywood told last week's conference that unless the merger was allowed, it would become "endgame" for the New Zealand assets, which the Australian publisher purchased for $1.19 billion from Rupert Murdoch's Independent Newspapers Ltd in 2003.
The Fairfax NZ assets were valued at just $122.2m in the proposed merger with NZME, which would see that business poured into NZX-listed NZME and hand the Australian parent $55m in cash and 41 per cent of the merged entity with the shares to be issued at 83.6 cents apiece. The NZME shares recently traded at 58 cents, having plunged to record lows since the draft determination.
Fairfax last week confirmed it had received an unsolicited offer from a mystery bidder, but said it's still within its exclusivity obligations to keep pushing the NZME merger. The National Business Review reported the offer was for $100m to $120m and The Australian newspaper speculated the bidder could be US hedge fund Apollo Global Management.