Why the Fairfax Media Limited board is going ahead with its Nine Entertainment Co Ltd merger

Credit: Alon

Fairfax Media Limited’s (ASX: FXJ) proposed merger with Nine Entertainment Co Ltd (ASX: NEC) is set to be approved by shareholders at an EGM or Scheme Meeting being held by the Fairfax board for shareholders today.

This is despite news reports in the Fairfax Media itself that its former CEO of, Anthony Catalano, is seeking to block the deal by writing a letter late on Sunday night to the Fairfax board that outlines an alternate plan to the board.

According to the news reports Catalano is proposing to buy 19.9% of Fairfax’s shares himself and then extract more value out of the group via improved performance at among other proposals.

However, it appears Fairfax’s board has dismissed the letter as not credible and today emphasised the benefits of bringing together some of Nine and Fairfax’s star assets.

“The combined group will be focused on enhancing the growth prospects for Domain and Stan and providing an improved proposition for advertisers to grow revenue,” Fairfax’s chairman told the scheme meeting this morning.

The problem for shareholders of both parties is that since the scrip merger deal was announced on July 27 2018 the value of groups has tumbled on the back of a weak full year report and October 12 trading update from Fairfax.

Unfortunately for all groups it’s been trading under Domain Holdings Australia Ltd (ASX: DHG) that has underperformed the market’s expectations in posting only flat revenue growth for the start of FY 2019.

Domain shares hit a record low of $2.29 last week on the back of the weak performance, but have climbed 4.7% to $2.46 this morning on the back of news that the merger is set to go ahead.

For investors it seems clear that the TV and print media space is facing structural problems with the Ten Network no longer listed and Seven West Media Limited (ASX: SWM) shares losing more than half their value over the last five years.

For the new Nine Group then much will depend on the performance of Stan and

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