The merger of Fairfax Media and Nine Entertainment has been given court approval, but a late suitor, the former chief executive of Domain Antony Catalano, is still considering an appeal to the full federal court.
Unless the appeal is successful, the merger will formally take place on 7 December.
Nine has said it intends to continue publishing the Sydney Morning Herald, the Age and the Australian Financial Review as well as the websites, but it is likely that regional publications and the New Zealand assets will be sold off or closed.
Catalano had put forward an alternative proposal for Fairfax just a day before the shareholder meeting last week to approve the merger.
He offered to buy 19.9% of Fairfax at above market prices, and to pursue a “multipronged strategy” to generate more value for the publisher’s shareholders by selling non-core assets, building the Domain franchises and pursuing other asset sales.
The bid was conditional on him being given a seat on the board, something the Fairfax board rejected.
Catalano’s tenure at Domain ended abruptly in January 2018, just months after the partial float of the real estate business he had helped establish.
The announcement to the Australian Stock Exchange said he had left because of family pressures There have also been allegations about the culture at Domain as a “boys club”, and there was reportedly no love lost between Catalano and Fairfax and Domain chairman, Nicholas Falloon.
Catalano holds roughly 1% of both Fairfax and Domain and had hoped his vision for Fairfax might entice other shareholders to support his 11th hour bid.
But on 19 November the Fairfax shareholders voted overwhelmingly to support the merger with Nine, under which the Fairfax shareholders will own about 49% of the merged company. The Fairfax name will disappear and the merged entity will trade under the Nine Entertainment name.
The deal was approved by shareholders despite a sharp fall in the Nine share price to $1.63, which meant the premium to Fairfax shareholders had been greatly diminished.
Catalano, who intervened in today’s hearing to approve the scheme, argued that his offer had not been put before the meeting as an alternative.
His counsel argued that the the independent expert report by Grant Samuel and Associates on the proposed scheme was inadequate because it had treated the proposed scheme as a merger, and not as a transaction where control of the company changed hands.
This distinction is important because in transactions where control changes hands, shareholders would generally expect a premium for surrendering control of their assets.
But Fairfax rejected this characterisation, saying the issues of control had been canvassed in the material sent to Fairfax shareholders and that commercially it was more in the nature of a merger.
Because the deal involves Fairfax shareholders receiving shares in Nine, the valuations in the report considered a range of share prices for Nine shares to calculate the price being paid from $2.15 to $2.25.
By the time the meeting took place, Nine’s share price had slumped to $1.63, outside the range in the report. Catalano’s counsel also raised this issue arguing that shareholders had not been given adequate information. Grant Samuel has since provided an updated assessment to the court, prepared after the meeting saying it stood by the analysis.
Counsel for Fairfax argued shareholders had all the information about the share price available to them because share prices were public .
Catalano’s lawyers also argued that some of the powers of attorney granted by institutional shareholders to companies voting on their behalf did not fulfil all the administrative requirements of either the Fairfax constitution or corporations law.
But these arguments were rejected by Fairfax, which said there was absolutely no evidence that those holding the powers of attorney had voted other than as directed by their corporate clients.
Justice Jacqueline Gleeson mused from the bench about why Catalano had left it until one day before the 19 November meeting to launch his alternative bid. She said there appeared to be “no good purpose in delaying the approval” because Fairfax was not going to give Catalano a board seat – a condition of his offer.
She refused to order a new meeting or delay the approval, but noted that the next step was not due to occur until 7 December, giving an opportunity for Catalano to appeal.
She planned to publish her reasons in the next 24 hours.
In an email to staff, Nine’s chief executive Hugh Marks said the merger would create one of the “largest and most diverse media organisations” in Australia.
“This deal is all about our strategy for the future together and it promises exciting opportunities for our employees, our clients and our audiences. Together we will provide our audiences with the best of entertainment and quality journalism on the platform they choose. As one company,” he wrote.
