The Fairfax takeover of Rural Press is being presented as a done deal because the merger agreement apparently contains a “bound to proceed” clause that effectively prevents Fairfax from abandoning the transaction. But that doesn’t stop anyone else moving in soon to take over Fairfax – it just raises the bar.

So why would another media player now bid for a Fairfax encumbered with a Rural Press “bound to proceed” clause? In a word, the internet.

The attraction of Fairfax to News Corp, PBL or Seven – with or without Rural Press – is the once-in-a-lifetime opportunity to combine Fairfax’s online position in Sydney and Melbourne with their own.

For News, the attraction of incorporating The Sydney Morning Herald and The Age’s online classified positions in real estate, recruitment and cars and their news websites could be irresistible. When combined with News’s leading positions in the other states, it would create the dominating role in Australian internet advertising through a single transaction. A similarly compelling logic applies to PBL.

To buy Fairfax, News would have to “divest” the Daily Telegraph and Herald Sun and quite possibly other assets to satisfy the ACCC. And perhaps flog off other parts to reduce the final cost. But such asset shuffling comes naturally to Rupert Murdoch.

Analysts today are predicting the likelihood of a bid for Fairfax is low. “Murdoch, Packer and Stokes will really need to pay up if they want to get their hands on Fairfax,”says Elizabeth Knight in The SMH. “A $12 billion price tag could be enough to keep them at bay”.

So it all comes down to price – around $6 a share would probably have the Fairfax shareholders queuing at the exits. But how often has price alone stopped an astute media mogul from snapping up a company-transforming asset?

Peter Fray

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