Shareholders snub John Fairfax issue

Shareholders in publisher John Fairfax Holdings have mostly snubbed a share issue to fund the company's New Zealand expansion.

Fairfax sought to raise A$88 million ($101 million) to partly fund its purchase of Independent Newspapers (INL) from the issue, but ended up A$27 million short.

Sixty-eight per cent of its shareholders rejected the offer.

Spokesman Bruce Wolpe said the Sydney-based Fairfax had raised A$61 million from the share issue, enough funding to complete its proposed purchase of INL.

"Ultimately we did not need to raise $A88 million - that's what it comes down to. The financing is complete without any need for additional financing."

About 32 per cent of existing shareholders took up the offer to buy either a A$1000, A$2000 or A$5000 parcel of shares.



But the $A27 million funding shortfall is the latest setback on the deal for Fairfax, one which an Australian analyst has labelled as the publisher's "Vietnam".

In The Australian newspaper yesterday, CCZ Equities analyst Roger Colman commented on the proposed purchase in a column titled "NZ: Is this Fairfax's Vietnam?"

The Australian is owned by Rupert Murdoch's News Ltd, a 44 per cent shareholder in INL.

The Vietnam analogy came from Colman's belief that Fairfax was moving into areas where it would struggle against a wily and experienced opponent in APN News & Media, owner of Wilson and Horton, which publishes the Herald.

"These are dead-end assets in a market only slightly better than Tierra del Fuego," Colman said yesterday, referring to the fact those most of the newspapers Fairfax was buying were in southern New Zealand.

Fairfax has agreed to pay $1.2 billion for the print assets of INL, including the Dominion Post , magazines, and a major stake in the New Zealand Press Association.





The price of the shares issued through the plan will be announced on June 17, and an acquisition date for INL will be settled this month.

Fairfax's plans to buy INL suffered a setback last month when the Government warned it would close a tax loophole that allowed media companies to benefit from selling and leasing back mastheads.

Closure could mean Fairfax' expected earnings from the deal drop from 20.1 per cent to 10.3 per cent. Colman estimated the loss of earnings to be A$100 million over five years.





* Meanwhile, around 130 INL staff are believed to have taken redundancy as a result of the change of ownership.

INL executives referred requests for comment on the issue to Fairfax. At an average of $50,000 per redundancy, that would cost the company about $6.5 million.

- NZPA