NZME declines Adshel NZ buyout option, makes new merger submission

Monday 28th November 2016

Auckland-based publisher NZME has turned down an option to buy the New Zealand arm of Australasian bus shelter advertising business Adshel.

In a statement to the NZX this morning, NZME also confirmed it had made a new joint submission to the Commerce Commission with Fairfax NZ, arguing again the case for the proposed merger between the two news publishers, which the commission has provisionally declined.

The submission, which is expected to become public in the next day or so on the commission's website, comes ahead of a three-day public conference on the proposal, from Dec. 6 to 8.

The submission "explains why the parties believe that the NZCC (commission) has failed to properly take into account the diversity of opinions that will continue post-transaction in an increasingly converged digital world".

NZME and Fairfax have effectively acknowledged there will be a concentration of market power caused by the merger and are seeking an authorisation rather than a clearance to merge, arguing that a merger is the only route to their commercial survival as traditional print publication revenues decline and cannot be replaced by new online revenue sources, which are smaller and are dominated by global players such as Facebook and Google.

Some 33 editors across NZME and Fairfax signed a joint letter, published at the weekend, urging the commission to reconsider and saying the regulator had failed to understand the new dynamics of the news industry. Another 10 former editors of titles in both stables have issued their own letter endorsing the commission's view.

In its statement today, NZME said it would be deferring seeking its shareholders' approval for the proposed merger until after the commission's final determination was released.

At the same time, NZME announced it would not be exercising its option to buy the New Zealand business of Adshel. The option came into play as a result of NZME's demerger from Sydney-based APN News & Media and APN's purchase of a remaining 50 percent interest in the Australasian Adshel joint venture last October.

"On the basis of the information available to it, NZME has chosen not to exercise the option," the company's statement said.

Financial statements for Adshel's New Zealand operation, filed with the Companies Office, show that it turned over $20.5 million in calendar 2015, compared with $18.2 million the previous year and that net profit after tax rose to $5.6 million from $5.1 million the year before.

The accounts show that related party loans from Adshel NZ to its Australian parent roughly doubled between the 2014 and 2015 financial years, from $6.7 million to $21.1 million.

NZME shares rose 1.8 percent at 56 cents this morning. The shares listed at 80 cents apiece in late June, rose as high as 96 cents in early August, and fell from 66 cents to 50 cents on Nov. 8 on the commission's draft determination declining the merger.

BusinessDesk.co.nz

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