The NZME Limited [NZX:NZM] share price has dived over 5% today after New Zealand’s Court of Appeal made a decision to disallow the proposed merger between NZME and Stuff Limited.
NZME, one of New Zealand’s largest media companies, controls over 80 radio, print and online channels. Its flagship brands are the New Zealand Herald and Radio New Zealand.
Stuff Limited (previously known as Fairfax New Zealand Limited), has a smaller presence in the country and is a subsidiary of Australia’s Fairfax Media Limited. Its flagship brands are The Dominion Post and the Stuff.co.nz website.
NZME’s share price is currently sitting at $0.65 at the time of writing. It has a market capitalisation of $129.37m.
Why has NZME share price fallen?
NZME and Stuff first sought permission from the Commerce Commission to merge their assets in May 2016. Their intention was to consolidate resources and save some regional newspapers from closure. This strategic move was sound.
Unfortunately, the Commission declined to allow the NZME/Stuff merger to go forward. The Commission argued that it would be detrimental for media competition, and it would only serve to shrink the country’s democratic space.
In December of 2017, NZME and Stuff took their case to the High Court, in a bid to overturn the Commerce Commission’s decision. However, this was unsuccessful, and the High Court ruled to uphold the original ruling.
This led to another case lodged with the Court Appeal. Today’s result was once again unfavourable. This may well serve as another nail in the coffin of the NZME/Stuff merger. The two parties will now have 20 working days to seek a final appeal from the Supreme Court.
Where could NZME go from here?
After three consecutive failures to seek approval for their merger, the odds aren’t good for a fourth try.
At this point, it remains unclear whether NZME and Stuff will actually seek an appeal with the Supreme Court. As the drama lingers, there is every chance that the NZME stock price could slip below $0.65 as agitated investors see their dreams of a grand media merger evaporate.
However, on a more positive note, the end may well be in sight. After more than two years of legal wrangling, there are no more surprised to be found. That could signal a period of stabilisation for the NZME stock price, once the market settles down and accepts the inevitable outcome.
Editor, Money Morning New Zealand