NZME loses again

Stuff reports:

company has withdrawn its application to the Commerce Commission to allow it to buy its major competitor Stuff.

The move came after a failed bid for an interim injunction to force Stuff’s Australian owner Nine Entertainment back into exclusive talks over the sale of the news website.

The decision is the latest in the on-again, off-again merger negotiations. The Commerce Commission prevented the deal going ahead in 2016. Appeals to the High Court the following year and then the Court of Appeal in 2018 both failed.

NZME shareholders should be aghast. The attempt by NZME to talk down the value of Stuff by declaring it was only worth $1 (its profit last year was in fact $28 million) has blown up. Such tactics may have worked against a Kiwi owner but Aussie companies play tough and Nine has now declared a fatwa on NZME. NZME have turned Nine from an ally to an enemy on the basis of one suicidal press release.

It is worth reflecting how much this has cost NZME in legal and commercial fees. Having chatted to some commercial lawyers their likely costs would be:

  • Application to Commerce Commission $800,000
  • High Court appeal of decision (including costs for other parties $2.5 million
  • Court of Appeal appeal $500,000
  • Interim Injunction sought $200,000

So they may have spent $4 million on legal and commercial fees on their attempt to buy Stuff, and have ended up with nothing. It’s probably more than this as the actual negotiations with Nine would also be constly.

The median salary for a journalist is around $60,000. So NZME could have funded 65 more journalists for a year for the cost of failing to buy Stuff.

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