Is Fairfax Media’s (FXJ) route out of the sagging NZ print market about to get rougher?
Fairfax Media Kiwi boss, Simon Tong resigned yesterday as managing director of Fairfax New Zealand just six days ahead of the long awaited finding on whether the company can merger with rival NZME (which was owned by APN) to create the country’s newspaper monopoly.
Tong is taking up a senior role at ASB (which is part of the Commonwealth Bank of Australia).
It looks like a case of either confidence (that the merger will happen) or resignation (that it will fail) on the part of the main spokesman for the deal in NZ.
Tong joined Fairfax NZ in 2013, and leaves tomorrow week (March 15) and begins as ASB’s executive general manager responsible for technology, innovation and payments on March 27. He was the main spokesman arguing in public for the merger which has run up against scepticism from the NZ competition regulator, the Commerce Commission.
The decision has been postponed from late last year after the Commerce Commission said in its draft ruling that it was inclined to deny approval for the merger. Mr Tong’s departure though is surprising because it was only on Wednesday that he and others from Fairfax and NZME actively pushing for the merger as we saw in media and other reports yesterday in NZ.
The merger would preserve “a strong news industry”, Fairfax New Zealand managing director Simon Tong and NZME chief executive Michael Boggs said in a letter to the Commerce Commission released on Wednesday.
Kiwi law firm Russell McVeagh, which is representing the two media groups in the deal, warned rejection would lead to “continued cost-cutting”, thereby affecting the coverage and quality of news publications.
The final ruling is due out next Wednesday and some NZ analysts claim it could go either way, although the more rational say it is hard to see the Commerce Commission back-pedalling on the strong comments it had made about media diversity in the draft ruling late last year.
If the merger happens, Fairfax will get a 41% stake in the merged company and around $50 million, and two board seats. But the timing of Mr Tong’s departure is curious nevertheless. He can’t think all the hard work has been done and the merger is a done deal, so time to move on? Or is an early recognition that there won’t be a deal and he has found an early exit?
But in case the deal is nixed, media reports say vultures are hovering with Southern Cross Austero expressing in interest in buying NZME’s radio business, while Fairfax Media has confirmed receiving an anonymous expression of interest in its New Zealand business, through a law firm.
NZME owns the NZ Herald and other papers as well as radio stations including Newstalk ZB and ZM saw print advertising revenues fall 10% last year, which was the main driver behind the 5% dip in overall revenue.
Fairfax New Zealand has a similar experience, with its newspapers such, which owns the Stuff website, and papers such as The Dominion Post, The Sunday-Star Times and The Press rsaw revenues dip 8% in the December half year.
In its draft ruling, the commission said benefits worth $NZ14 million over five years from the merger would be outweighed by a loss of media diversity and “content quality".
The merger would result in the second-highest concentration of print-media ownership in the world, “behind only China”, the Commission claimed.
Fairfax shares fell half a per cent to 95.5 cents, MZME shares in Australia rose 2% to 76.5 cents.
On Friday morning, the NZ Commerce Commission announced that the decision on the Fairfax-NZME merger had been pushed back to April 11 from next Wednesday. The new date is 2 days before the Easter break.
The commission said that a lot of extra information had been received since it made its interim decision – a no to the merger – in November and in a separate statement, Fairfax and NZME said that the extra information strengthened the arguments for the merger to be allowed.
