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Shareholders express concern over value of Nine merger

The Nine Entertainment-Fairfax Media merger remains in a state of flux as shareholders express doubts about the value of the bid in the wake of a fall Nine’s share price since the deal was announced last Thursday.

Under terms of the scrip and cash deal, Nine would gain 51.1 per cent of the new entity and Fairfax 48.9 per cent.

Nine offered Fairfax shareholders 0.3627 Nine shares for every share they held and 2.5c cash, valuing Fairfax at $2.15 billion – a 21.9 per cent premium to its closing price at $2.52 on the day before the announcement. However, based on a share price of $2.30, the deal is valued at $1.976 billion.

Nine’s share price was up only two cents from the $2.30 mark in mid-afternoon trade today.

The fall in share price has led significant Fairfax investors to express doubt over the value the merger offers shareholders. Thorney investment head Alex Waislitz said the offer was too low, while others believe the lower price effectively put Fairfax in play, with possible suitors ranging from private equity firms to rival media companies.

Ausbil Investment Management chief executive Paul Xiradis said while the deal had merits in bulking up traditional media companies against the likes of Google and Facebook, he needed to better understand the bid valuation before deciding whether to back the transaction. He said he would seek talks with Fairfax.

However, Nine’s largest shareholder Bruce Gordon – the owner of regional TV network WIN Corporation – indicated in an interview with Fairfax Media that he supported the merger. “It looks like a sensible deal all around. I like it,” he said.

The merger faces a review by the Australian Competition and Consumer Commission, as well as approval by Fairfax shareholders. The public review will have a timeline of about 12 weeks, and will involve consultation with industry stakeholders.

When reviewing mergers in the media sector, the ACCC considers the competition impact on consumers, advertisers and content creators/sellers. The impact of technology on the media sector will be a critical part of the competition analysis.

Fairfax’s managing director of Australian Metro Publishing Chris Janz said the company was finalising its documentation to be sent to the ACCC.

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