John Fairfax, Australia's second-largest newspaper group, yesterday said it would pay 1.2 billion New Zealand dollars (€609 million) for the publishing businesses of Independent Newspapers (INL), New Zealand's biggest media company, controlled by Mr Rupert Murdoch, Fairfax's rival in Australia.
Fairfax, publisher of the Australian Financial Review, the Sydney Morning Herald and Melbourne's The Age will acquire INL's 72 newspapers including Wellington's Dominion Post, 13 magazines, its news website and distribution arm in an all-cash deal.
The price was at the upper end of expectations. However, INL will retain its 66 per cent interest in New Zealand's Sky TV, less than a week after Mr Murdoch, who also owns a key stake in Australia's Foxtel pay television, won control of DirecTV, the largest satellite TV operator in the United States.
INL did not say how it would use the proceeds of the sale, prompting speculation that it would bid for the rest of Sky to extend Mr Murdoch's global pay-TV empire.
Both INL and Fairfax shares have been suspended since Friday, when they closed at NZ$3.38 and 3.03 Australian dollars respectively.
INL shares are set to rise by as much as 30 per cent when they resume trading today.
A Wellington-based analyst said the deal priced INL shares at NZ$4.37, about 10 times earnings. "No one buys a business cheaply from Murdoch," he said.
Sky shares closed 10 cents higher at NZ$4.05 yesterday.
The deal is Fairfax's largest acquisition since it bought The Age nearly 20 years ago and means it will earn 30 per cent of its revenues in New Zealand.
It will be funded two-thirds by debt and the rest through a A$393 million (€221 million) share offer. It also planned to run an underwritten dividend re-investment plan for at least a year.
Fairfax said it would sell the INL titles and lease them back to claim a tax deduction. New Zealand's advertising market has experienced higher growth and less volatility than Australia's over the past 10 years, so the deal would lessen the Fairfax group's reliance on the Australian advertising revenue cycle.
Fairfax's second-half net profits before significant items would be higher than last year's A$43.4 million, Mr Fred Hilmer, chief executive, said.
Analysts said the deal could constitute a pre-emptive move by Fairfax to ward off a potential takeover bid from Sir Anthony O'Reilly who owns Wilson and Horton, New Zealand's other main newspaper group.
The acquisition is contingent on due diligence by Fairfax, and approval from New Zealand's Overseas Investment Commission.
- (Financial Times Service)
