NZX-listed publishing and broadcasting company NZME lost almost a quarter of its value today after the Commerce Commission said it did not support the planned merger with Fairfax New Zealand.
NZME's share price fell by 16c or 24.2 per cent to 50c - its lowest level since listing in June - and taking the company's market capitalisation down to $98 million from $129.4 million. In Australia, Fairfax Media shares were steady at A80.7c.
NZME owns the New Zealand Herald, the Herald on Sunday, nzherald.co.nz website, a range of regional newspapers, Newstalk ZB and a range of entertainment radio stations while Fairfax owns stuff.co.nz, the Sunday Star-Times and other metropolitan and regional newspapers.
Harbour Asset Management portfolio manager and analyst Shane Solly said the decision was in keeping with the commission's recent "strident" announcements, having just poured cold water on the proposed Sky-Vodafone deal.
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"I guess the Commerce Commission has made some reasonably strident decisions in a number of different cases, but this will surprise some investors," Solly said. He said it was now up to the parties to restructure their merger proposal.
The Commission last month said it had delayed its decision on whether to approve the company's tie-up with Vodafone NZ and said the merged entity would use its muscle to squeeze out smaller rivals.
In today's statement on NZME and Fairfax, the Commission said in its preliminary view, the merger would be likely to substantially lessen competition in a number of markets, including the markets for premium digital advertising, advertising in Sunday newspapers and advertising in community newspapers in 10 regions throughout New Zealand.
"It also considers the merged entity would be likely to increase subscription and retail prices for Sunday newspapers and introduce a paywall for at least one of its websites," the Commission said.
The two media companies made a joint statement to the NZX this morning, saying the Commission's concerns relating to plurality of media were "unquantified."
"The parties' view is that the NZCC has failed to properly take into account the diversity of opinions that will continue post-transaction in an increasingly converged digital world," the statement said.
The Commission is seeking submissions on its draft determination by the close of business on Tuesday November 22.