Stuff has been the laggard among Fairfax Media Group's trans-Tasman businesses in recent months and may be sharpened up for divestment if a merger with Australia's Nine Entertainment Co goes ahead.

The Australian media companies gave a trading update today before lodging documents detailing the A$2.2 billion merger which will put TV channel Nine in the driver's seat.

Under the proposed transaction, Nine shareholders would own 51.1 per cent of the combined entity while Fairfax would own the remaining 48.9 per cent.

Read more:
Merger with Nine means goodbye Fairfax


While Fairfax group revenue since June 30 was down 5 per cent, the New Zealand business was the worst performer with a 15 per cent decline in New Zealand dollar terms and 16 per cent in Australian dollars. Australian community newspaper sales were next, down 10 per cent.

Stuff isn't considered core for the merged entity, having previously been touted by Fairfax group chief executive Greg Hywood as a potential growth engine. Last year he said the hyper-local Neighbourly website had turned profitable and had created a compelling digital platform with Stuff's strong online audience.

Fairfax's Greg Hywood (left) and Nine's Hugh Marks at the July announcement. Photo / Supplied
Fairfax's Greg Hywood (left) and Nine's Hugh Marks at the July announcement. Photo / Supplied

Fairfax's New Zealand arm this year formally adopted the website's Stuff moniker as its registered name.

The Australian firms are aiming to effect their merger before the end of the year. Annual savings of A$50 million are expected within two years.

Fairfax still has the option of pursuing a Supreme Court appeal to clear a merger with its New Zealand rival NZME, although other tie-ups have been touted as alternatives, such as a deal with MediaWorks. Stuff chief Sinead Boucher last month said consolidation remained essential for the wider industry.

Under Boucher's watch, Stuff has accelerated its digital-first approach, closing down or selling a third of its largely unprofitable community and regional publications. She's also overseen the move into new services including retail broadband, streaming video and electricity retailing.

The New Zealand unit accounted for A$16.2 million of the A$36 million the group spent on restructuring and redundancies in the June year. Stuff's earnings before interest, tax, depreciation and amortisation shrank 27 percent to NZ$40.5 million. Revenue fell 7.5 percent to NZ$301.4 million

Among Fairfax's other activities, revenue at its metro media arm was down 1 percent and flat at metro publishing. Online real estate listings firm Domain posted a 6 percent increase in digital revenue, although total revenue was down 1 percent. Revenue at Macquarie Media rose 3 percent.


The Australian community newspapers division is also seen as ripe for a sale if the merger gets approval. Fairfax said it's still cutting costs.

In contrast, Nine's free-to-air TV advertising was broadly flat in a slightly softer market while digital revenue rose 10 percent. Nine still expects annual earnings before interest, tax, depreciation and amortisation of A$280 million to A$300 million.

Next step toward merger

Fairfax director of communications told the Herald this morning that the deal was always subject to shareholder approval and the release of the trading note this morning was the next step toward attaining that.

Hatch said a scheme booklet released in the near future would outline the steps toward finalising the merger.

The news from Australia comes shortly after Stuff and NZME saw their proposed merger knocked back after the Court of Appeal rejected their challenge to Commerce Commission's refusal to allow the two companies to come together.

Read more:
Court of Appeal rejects NZME and Stuff merger challenge

In May last year, the commission declined to authorise the tie-up, arguing it would concentrate too much media influence in one business.

There have been similar media plurality concerns across the Ditch with the matter also being handed over to the country's competition watchdog, the Australian Competition and Consumer Commission (ACCC).

Media in Australia reported that the ACCC received more than 450 submissions in regard to the proposed merger.

Australia's Media Entertainment and Arts Alliance (MEAA) has been particularly fierce in its opposition to the merger, saying it would reduce media diversity in the country.

The ACCC has pencilled in a provisional date of 8 November for the announcement of the decision.

While it might seem pre-emptive for Fairfax to be seeking shareholder approval before the ACCC makes its decision, Hatch said it wasn't unusual for these processes to happen in parallel when it comes to mergers.

Should the ACCC raise any potential objections to the merger, Fairfax and Nine would have to respond to these before the merger could go ahead.

- Additional reporting BusinessDesk