* NZME and Fairfax own 90 pct of New Zealand newspapers
* Merger would reduce quality, diversity: regulator
* NZME shares slump as much as 16 pct, Fairfax loses up to
(Recasts, adds company and analyst comments)
By Charlotte Greenfield and Jamie Freed
WELLINGTON/SYDNEY, May 3 New Zealand's
competition regulator blocked the planned merger of the nation's
two largest publishing groups, saying the deal would have led to
unprecedented local media influence and built the world's most
concentrated newspaper market outside of China.
The decision will force NZME Ltd and Fairfax Media
Ltd's New Zealand unit to find alternative strategies
to deal with heavy competitive pressure and the loss of
advertising dollars to digital rivals such as Alphabet Inc's
Google and Facebook Inc.
NZME and Fairfax control nearly 90 percent of New Zealand's
newspapers and clearance for the deal could have set a precedent
for increased concentration in the future in neighbouring
Australia, where Rupert Murdoch's News Corp and Fairfax
are the dominant players and are under similar financial stress.
New Zealand Commerce Commission (NZCC) Chairman Mark Berry
said the planned merger would have concentrated media ownership
and influence to an "unprecedented extent" for a
well-established modern liberal democracy.
“Having reviewed all the evidence, our primary concerns
remain that this merger would be likely to reduce both the
quality of news produced and the diversity of voices (plurality)
available for New Zealanders to consume," he said in a statement
The competition watchdog had twice delayed its final
decision as it heard arguments from the two companies on why the
increasing media diversity from the growing number of digital
operations meant the deal should be allowed to go ahead.
NZME owns the Auckland-based New Zealand Herald, the
country's top-selling newspaper, and Fairfax publishes the main
papers in the other major cities, Wellington and Christchurch,
as well as popular website stuff.co.nz.
Under the proposed deal, NZME would have paid NZ$55 million
for Fairfax's New Zealand operations. It would also have issued
new shares to allow Fairfax to hold a 41 percent stake in NZME.
Combining the assets would have helped to cut costs by up to
NZ$200 million ($138.98 million) over five years, the two
Fairfax Chief Executive Greg Hywood said his company would
focus on cost cutting in New Zealand after the NZCC decision.
"Further publishing frequency changes and consolidation of
titles is an inevitability," he said in a statement.
NZME Chief Executive Michael Boggs told Radio NZ his company
could consider buying some of Fairfax's smaller papers if they
Daniel Mueller, a senior analyst at Forager Funds Management
which owns a 9 percent stake in NZME, said that company was in a
stronger position than Fairfax in New Zealand because it also
had sizeable radio assets and more potential for online growth.
"We think they can stabilize earnings for the medium term
rather than some other media companies that are in pretty rapid
decline," he said.
Fairfax and NZME have the option of appealing the NZCC
decision to the High Court within 20 business days.
NZME shares fell as much as 16 percent on Wednesday, while
Fairfax shares were down as much as 3.2 percent.
Separately, Fairfax said on Wednesday it would shed another
125 jobs at its Australian newspapers. The union representing
journalists at Fairfax in Australia said staff had voted to
strike work for seven days as a result of the cuts.
A Fairfax spokesman did not respond immediately to a request
($1 = 1.4391 New Zealand dollars)
(Reporting by Charlotte Greenfield and Jamie Freed; Editing by
Jonathan Oatis and Muralikumar Anantharaman)