Nine has announced it will sell the former Fairfax’s regional newspaper division to former Domain boss Antony Catalano. By June 30 this year, the long-predicted sale will be completed, with Nine offloading the 160-plus regional titles including the Canberra Times, Newcastle Herald, The Examiner, The Border Mail and the Illawarra Mercury. The group also includes around 130 community-based websites, and agricultural publications such as The Land, Queensland Country Life, and Stock and Land. <
In announcing the deal, Nine CEO Hugh Marks said the sale was part of the company’s strategy to “exit non-core businesses and to focus on Nine’s portfolio of high-growth, digital assets. We will retain a commercial relationship with ACM and look forward to continuing to work with the business in areas where there are mutual benefits to both Nine and ACM.”
Nine and a struggling Fairfax announced they would merge last year, and Nine’s plan for ACM has been under scrutiny since that was first announced.
And this sale, with staggered payments, looks as though it is on vendor’s terms (which Nine denies) — something Melbourne-based property player and former Fairfax executive Catalano would understand very well. Catalano bought the division — Australian Community Media — with his backer Melbourne billionaire Alex Waislitz whose company is Thorney Investments.
Vendor finance can mean the buyer doesn’t have the money to pay the asking price and needs time to pay. On other occasions it suggests that the vendor is desperate to get the asset being sold off its books. But these terms can also be used when the seller is so desperate to sell an asset that the position of the buyer is strengthened immeasurably, which can be used to drive a very hard-nosed bargain and require the seller to finance the sale of the asset.
As a long time shareholder Thorney would know the Fairfax businesses being sold by Nine intimately. Thorney was a substantial shareholder in Fairfax Media up to the time of its takeover by Nine late in 2018. With Thorney and a billionaire involved in the shape of Waislitz (who is part of the Pratt family) you’d think it would have been simple to pay the $115 million sale price to Nine. But nope, the Nine statement to the stock exchange on Tuesday morning reveals the full asking price will not be paid up front — $105 million up front with $10 million withheld for a year. Either way it’s a deal that will benefit the buyer and not the seller and indicates how desperate Nine was to be rid of the 170 regional and community papers in ACM.
Stories in Fairfax papers in the past week provided a big hint about why the Nine’s statement was unclear — revenue and profits are falling sharply at ACM. For example Nine reports last Thursday said: “Nine expects the business will make around $44m in earnings before tax during fiscal 2019, before stabilising at around $50m over the next three years.”
Nine itself hinted at the vendor terms in the Tuesday morning statement: “In conjunction with the sale, ACM and Nine have also entered into arrangements which preserve the commercial relationships that have existed during Nine’s ownership of the business. This includes printing of Nine’s metropolitan publications (The Age, The Sydney Morning Herald and The Australian Financial Review) and, for a short transitional period, sharing of content between ACM publications and the metropolitan publications.”
Presumably that covers the Domain real estate links with some of the ACM papers such as the Canberra Times, the Illawarra Mercury and the Newcastle Herald. The negotiation of a new content sharing (news and property) will be a major cost/income deal for Catalano and perhaps a future source of tension. Catalano could threaten to buy content from other sources, such as AAP (Fairfax has a big stake in that) or News Corp.
CLARIFICATION: This story has been updated to clarify that $105 million will be paid on settlement, with $10 million withheld for a year. Nine says the sale is not on vendor terms.