SYDNEY (Reuters) - Australian newspaper publisher Fairfax Media Ltd <FXJ.AX> said on Wednesday annual profit fell more than analysts had forecast, reinforcing its case for a buyout from television broadcaster Nine Entertainment Co Holdings Ltd <NEC.AX>.
The bigger-than-expected profit slide, even after years of journalist layoffs and shuttered mastheads, underscores the challenge for traditional media companies globally as they grapple with a flight of advertising revenue to internet giants like Facebook Inc <FB.O> and Google <GOOGL.O>.
The 177-year-old publisher of The Sydney Morning Herald, The Australian Financial Review and other newspapers wants shareholders to vote for a $1.6 billion takeover by the top-rating free-to-air broadcaster, saying the deal would give it the scale to compete in the changed environment.
Some Fairfax shareholders have said the deal might undervalue the company. It is worth less than two private equity approaches a year ago, although Fairfax has since spun off its profitable property classifieds arm Domain Holdings Australia Ltd <DHG.AX>.
"It puts the important work we do through our journalism on an even stronger and more sustainable footing for the future," CEO Greg Hywood said on an analyst call on Wednesday, referring to the Nine deal.
Underlying profit fell 12.4 percent to A$124.9 million ($90 million) for the year to end-June, short of the A$129.8 million average forecast of analysts polled by Thomson Reuters I/B/E/S.
Revenue from metro daily online subscriptions rose 9 percent and from online streaming 72 percent. Nine has said it was drawn to Fairfax's digital performance.
Fairfax shares were trading steady at 89 Australian cents by mid-session, in line with the Nine cash-and-shares offer price, implying investors believed the deal would proceed. Nine shares were down 0.2 percent, while the broader market <.AXJO> was flat.
A spokeswoman for Nine, which reports its annual results on Aug. 23, declined to comment.
"The Nine-Fairfax merger was about the digital assets and on that basis, the latest numbers for Domain and the 9 percent increase in digital subscription revenue from print only reaffirms our view," said Nigel Pugh, managing director of media analyst firm Venture Insights.
Fairfax announced a final dividend of 1.8 cents per share, down from 2 cents a year earlier.
($1 = 1.3868 Australian dollars)
(Reporting Byron Kaye in SYDNEY and Nikhil Kurian Nainan in BENGALURU; Editing Stephen Coates)
