NZME – owner of the NZ Herald and Newstalk ZB - has applied to the High Court at Auckland for an interim injunction against ASX-listed Nine Entertainment.
The hearing, which is being heard by Justice Katz, has attracted the interest of media representatives from NZME, Newsroom, Stuff, NBR and RNZ.
Lawyer Jack Hodder QC is representing NZME, while John Dixon QC is in Nine Entertainment's corner.
It's been established that the commercial terms of the transaction be treated as confidential, precluding the media from reporting on this aspect of the matter.
NZME says it has an exclusive agreement, for a set time, to negotiate the purchase of Stuff.
The move follows an exchange of statements earlier this week after NZME filed an urgent Commerce Commission application to purchase Stuff for a nominal sum of $1.
Nine responded with a statement saying the parties had withdrawn from the bid last week and had terminated talks.
NZME hit back, saying it still had exclusivity and is now taking legal action to enforce it.
A hearing on the interim injunction is set down to start at 11am today.
In a statement to the Herald on Thursday, an NZME spokesman said the company did not accept that exclusivity had been validly terminated.
"NZME has filed an application for an interim injunction against Nine Entertainment Co Holdings Limited seeking orders to enforce this binding agreement entered into between NZME and Nine on 23 April 2020."
Nine has been looking to sell Stuff for some time.
For the full year to June 31, 2019, Stuff reported a profit of $5.5 million. Revenue fell 12 per cent to $269m.
The previous year, Stuff had reported a loss of $74m due to write-downs.
In the first half of 2020, it reported revenue of $129 million, up slightly on the previous period.
Revenue from advertising dropped 10 per cent to $67m, compared with the same period last year. Circulation dropped 3 per cent, earning just over $41m.
Total liabilities stood at $73.9m as at June 2019, of which $43.1m was classified as current and $15.6m from provisions related to lease incentives and onerous leases.
NZME's operating profit rose 4 per cent to $19.7 million last year but the company reported a net loss of $165.2m after deciding to impair the value of intangible assets to account for a lower share price.
NZME said a challenging advertising market continued to affect print and digital advertising, together with declines in print circulation revenue.
Net debt was $74.7m at December 31, 2019, a significant reduction from $98.3m one year earlier. Net debt to operating Ebitda was 1.5 times for the 2019 financial year, a decrease from 1.8 times for the 2018 financial year.
The court appearance of the two companies comes off the back of yesterday's Budget announcement, which did not include a bailout for struggling media companies.
The Government announced that any help for media companies would come out of the $20 billion still to be allocated.
Broadcasting Minister Kris Faafoi earlier unveiled a $50m package to help media, but this has offered little to print media.
NZME has long seen the takeover of Stuff as the best way to ensure New Zealand maintains a strong media environment.
NZME has spent the best part of five years attempting to buy its competitor but has previously been declined Commerce Commission clearance.
It says the media landscape has been so wildly impacted by Covid-19 and foreign digital giants such as Facebook and Google that it is the best owner in order to save newspapers and journalism jobs.
"NZME's proposed acquisition of Stuff is important to the continued operation of a robust fourth estate and plurality of voice in this country," NZME told the NZX on Monday.
In a letter to Faafoi on Monday, NZME chairman Peter Cullinane and CEO Michael Boggs said NZME fully respected the commission's processes and "will see our application through if possible".
"The significant obstacle we face is that there is insufficient time to do so given the extraordinary conditions the industry finds itself in. We are mindful of what happened to Bauer Media and we are focused on saving hundreds of jobs and regional mastheads which may be lost if we do not act with this urgency. Time is of the essence and we seek your urgent assistance to allow completion by 31 May 2020."
The Herald reported this week the Commerce Commission was waiting for more information from NZME before publishing the new application.
"We're seeking further information from the applicant before we can register it," a Commerce Commission spokesperson said.
The Herald understands Nine is not comfortable with the full contents of the application being made public.
NZME is urging the Government to legislate to overturn the Commerce Commission's original decision to turn down a merger in the face of growing pressure in the media industry.
The regulator ruled in 2017 that allowing the companies to merge would diminish media plurality and concentrate too much power in a single organisation.
However, the decision has long been controversial, with many critics saying it didn't place adequate emphasis on digital tech companies - Facebook and Google - competing for advertising dollars with media companies.
