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ANALYSIS: Pundits have been speculating wildly about the future of Stuff in the wake of a stock exchange announcement from NZME that it had asked for a law change allowing it to buy Stuff for a dollar.
But all we really know for sure is that Stuff’s Australian owner, Nine, would sell Stuff if it could, at a suitable price, and that a sale seems to be coming to a head after being put on the back-burner last year.
A Nine spokesman says it is continuing to have discussions with “a range of interested parties” on the sale of Stuff.
And, no, Nine’s asking price does not appear to be $ 1.
Shortly after NZME’s surprise announcement to the NZX on Monday, Nine revealed that it had terminated discussions with NZME last week, meaning there is no $ 1 transaction with NZME for the Government to approve.
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An assertion from one commentator, citing unnamed sources, that Nine had told the Government it would shut down Stuff by the end of May if it couldn’t find a buyer was also shot down by Nine.
A Nine spokesman confirmed it had given the Government no such deadline.
What other suitors Stuff might have is largely speculation.
TVNZ remains a possible candidate, now that Broadcasting Minister Kris Faafoi has put the merger of TVNZ and RNZ on ice.
Chief executive Kevin Kenrick would not disclose last year whether it had sought an information memorandum from Nine on the sale of Stuff, but dropped plenty of hints that it was interested.
They included making it clear that TVNZ had big ambitions in the online news space and would look at anything that could assist with that and “weigh it up accordingly”.
Allowing TVNZ to buy Stuff would be a safe option for the Government if it was concerned about Stuff’s large media operation falling into “unwanted” hands.
But that doesn’t mean it’s on the cards.
A takeover of Stuff by TVNZ might solve one problem for the Government, but cause another by potentially making the viability of NZME more precarious.
There might be interest from other established players – such as Sky TV, perhaps, or MediaWorks’ majority-owner Oaktree – but this is guesswork.
Not-For-Syndication
TVNZ chief executive Kevin Kenrick appeared to make little secret of an interest in Stuff last year, but has the moment passed?
There is some known and rumored interest in Stuff from local media moguls and private equity firms.
But there is little or anything that could be meaningfully said about whether any or many could come up with a purchase price acceptable to Nine.
Maybe, but probably not.
It is worth dwelling, though, on one of the oddities of NZME’s initial release to the NZX, which was that it specified a price, one dollar, at which NZME wanted to buy Stuff.
NZME spokesman Cliff Joiner would not comment on whether it was assuming Nine would become a minority owner of a merged business as part of any such deal – as the companies’ original merger discussions in 2016 envisaged.
But the main purpose of the release appeared to be to inform the market that NZME had approved the Government, asking it to smooth the way for a takeover, and had filed an application for clearance with the Commerce Commission.
The release was headed: “NZME requests urgent Government action”.
As such, there was no obvious need for NZME to disclose any potential price for its intended transaction, let alone one that it had not even agreed with Nine.
The most benevolent explanation is that NZME was simply trying to drive home to the Government how much trouble it thought the media industry was in.
Simon Maude / Stuff
NZME’s motivations in stating a desire purchase price for Stuff appear unclear.
Ironically, NZME’s actions on Monday may shed more light on its own circumstances than on those of Stuff.
While Nine clearly wants to exit New Zealand, it is not under any external pressure to sell Stuff, which is better described as an irrelevance rather than a drag on its business.
Nine is valued at A $ 2.45b (NZ $ 2.6b) on the ASX and its share price has actually risen over the past two months.
But NZME, which has already responded to the coronavirus crisis by making 200 staff redundant, does not have such a deep-pocketed – albeit disinterested – backer.
NZME is valued at $ 53m on the NZX and had already suspended dividends in order to pay down debt before Covid-19 struck.
Analysts have tended to think of NZME as being comprised of two main businesses: a troubled newspaper and publishing arm akin to Stuff’s, and a more desirable radio business.
Only time will tell if that narrative will remain convincing in a post-Covid-19 world.
At a select committee in mid-April, Stuff chief executive Sinead Boucher said its advertising revenues had more than halved in the previous few weeks, and NZME managing editor Shayne Currie said it had also seen a 50 per cent drop in April.
NZME’s short-term fortunes could well improve if it merged with Stuff, or if Stuff was significantly retrenched, but if not, it faces difficult questions.
NZME’s actions on Monday had a whiff of panic about them, and no-one in the media industry should take pleasure from that.
There was an important subplot to the market confusion on Monday.
NZME shares rose by 17 per cent in the wake of its morning announcement about Stuff.
NZX Regulation might have been expected to respond to Nine’s ASX statement that negotiations had been terminated by immediately suspending trading in NZME shares, until NZME provided clarity.
But instead of taking such firm action, NZX Regulation contacted NZME on Monday and the upshot appears to have been the brief follow-up statement that NZME issued to the exchange early on Monday afternoon.
NZX spokesman David Glendining explains NZX Regulation’s actions on Monday as follows:
“NZX Regulation initially escalated inquiries into NZME immediately following media reporting regarding the status of discussions between NZME and Nine Entertainment, which we note preceded the ASX release by Nine Entertainment.
“That included engaging with NZME and its external legal counsel at various points during yesterday morning regarding NZME’s statement on the Stuff acquisition process, including before the release of the statement by Nine Entertainment on ASX.
“Given the information that was available to the market at that time, NZX Regulation considered it most appropriate for NZME to clarify the status of discussions between the parties, relative to the exclusive negotiation arrangements that had been agreed,” he says.
Not-For-Syndication
The NZX says its regulatory branch engaged with NZME’s top lawyer a number of times on Monday.
NZME’s second statement to the NZX acknowledged Nine’s statement that talks between the companies had been called off, while offering a justification for its original release to the NZX.
NZME said its view was that it was still in a binding exclusive negotiation period with Nine, and did not accept that exclusivity had been validly terminated.
That doesn’t appear to be Nine’s take on the current situation.
Regardless, that is by-the-by unless anyone is seriously suggesting that NZME hopes that the Government will not only clear the way for it to take over Stuff, but will also give it some sort of “compulsory purchase order” requiring Nine to sell Stuff at a price it can afford.
That would be wishful thinking from NZME in the extreme.
Sure, discussions between Stuff and NZME could be revived.
Depending on Stuff’s other suitors, that could even be a decent outcome – but it is not looking like a probable one.
