The two media companies will formally merge on December 7, however, Catalano has signaled he may seek an appeal of the court ruling.
Catalano owns around 1 percent of Fairfax and Domain. He put forward an alternative proposal in which he would buy up 19.9 percent of Fairfax shares and introduce a strategy that would provide greater shareholder value in exchange for a seat on the Fairfax board.
He had asked that the shareholder vote last Monday be adjourned so his proposal could be heard, but the Fairfax board declined and shareholders voted overwhelmingly in favor of the takeover.
In the Federal Court Tuesday, Catalano’s legal team argued that shareholders were being short-changed” by $600 million AUD ($433 million U.S.) because Nine’s share price had diminished significantly since the takeover was announced in July.
Nine’s share price has dropped 36 percent from $2.56 ($1.85 U.S.) when the deal was announced to $1.63 ($1.18 U.S.).
Andrew Broadfoot QC, representing Catalano, argued that under the original terms of the deal, Fairfax shareholders were contributing 45 percent of the value in return for a 49.9 percent stake in the new entity.
But Fairfax shareholders would “now be contributing 50 percent, but receiving 49.9 percent of the value,” he said.
Justice Jacqueline Gleeson refused to order a new hearing or delay the approval, saying “there appeared to be no good purpose in delaying the approval” because Fairfax was not going to give Catalano a seat on the board.
Unless Catalano is successful in appealing Justice Gleeson’s decision, the Fairfax brand will cease to exist and chief executive Greg Hywood (LinkedIn profile) will depart the company. The new entity, to be known simply as “Nine,” will be led by existing Nine CEO Hugh Marks, with former Howard Government Treasurer Peter Costello as chairman.
Nine will inherit Fairfax’s 60 percent stake in real estate company Domain Group, and will continue to publish Fairfax titles the Sydney Morning Herald and The Age, in which the Domain print magazine is distributed.
It’s understood that other Fairfax assets, particularly its titles in New Zealand, will be sold off or closed.
Fairfax had been trying to merge its New Zealand business with rival media company NZME but had been blocked by the country’s regulator. A subsequent challenge in the High Court failed, as did an appeal to overturn the High Court’s decision.
The two companies have one last chance in the Supreme Court to overturn the decision. If unsuccessful and Nine can’t find an alternative suitor for the titles, it’s unlikely they will continue to operate under Nine management.
Nine’s main interest in the Fairfax business was to acquire Domain and the 50 percent shareholding it didn’t already own in streaming service Stan. With Domain in its stable, Nine becomes the largest and most diverse media organization in Australia, spanning print, online, commercial television and radio.
“Together, we will provide our audiences with the best entertainment and quality journalism on the platform they choose,” Nine CEO Hugh Marks said in an email to staff.