Nine Entertainment Company (ASX: NEC) published their press release which stated that the it would be merging with Fairfax Media Limited (ASX:FXJ). This would strengthen the former’s current market position and the company would be in the list of leading media companies. As per the scheme of arrangement, Nine Entertainment would be acquiring 100% shares of Fairfax after receiving the regulatory approvals as well as after the completion of other formalities.
Once the transaction gets completed, the shareholders of Nine would be holding 51.1% of the company which would be formed after merger. Needless to say, the remaining portion (48.9%) would be held by the shareholders of Fairfax. The merged company would be headed by the present CEO (chief executing officer) of Nine entertainment named Hugh Marks. The merged company’s board would also include three directors of Fairfax while the Chairman of the board would be the present Chairman of Nine Entertainment named Peter Costello. However, the board would also be having the two more directors of Nine Entertainment. Among the three directors of Fairfax, one would be Nick Falloon and the other two directors are Mickie Rosen as well as Patrick Allaway.
What’s in it for the shareholders?
As per the arrangement, the shareholders of Fairfax would be receiving 0.3627 shares of Nine Entertainment against every share of Fairfax which was held. Along with this, Fairfax’s shareholders would also be eligible for $0.025 cash against every share of Fairfax. The aggregate consideration (i.e. cash and in scrips) reflects 21.9% premium on the share price of Fairfax closed on July 25, 2018 which was $0.770. This also represents a 22.6% premium on the one-month volume weighted average price or VWAP of Fairfax on the same date which was $0.766.
At the time of writing, Nine Entertainment was trading at A$2.265 reflecting an increase of 1.57% while Fairfax Media was trading at A$0.835 implying an increase of 2.5%. The stock price of NEC has advanced 45.75% this year to date while the stock price of FXJ witnessed the rise of 11.6% in last six months.
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