The former chief executive of Domain has joined billionaire Bruce Gordon in expressing initial support for Nine Entertainment Co's $4 billion merger with Fairfax Media, arguing the property website would benefit from greater exposure on free-to-air television.
Antony Catalano, who was Domain chief executive for four years, described the tie-up as "absolutely a positive" for the real estate portal. Fairfax, publisher of The Sydney Morning Herald and The Age, holds a 60 per cent stake in Domain following a partial sharemarket listing in November.
Nine's largest shareholder, the Bermuda-based billionaire Bruce Gordon, also indicated support for the deal in his first public comments since the tie-up was announced last week.
"It looks like a sensible deal all around. I like it," Mr Gordon said in a short statement to Fairfax Media.
The proposed transaction would unite Nine's free-to-air network with Fairfax's newspaper mastheads, which also include The Australian Financial Review; its interests in radio stations including Sydney's 2GB and Melbourne's 3AW; and video-streaming platform Stan.
Domain is considered Fairfax's key asset, with Nine chief executive Hugh Marks saying the Sydney-based business was a key driver behind the deal.
“If Nine gets it right it could become an incredible cash cow so the pressures of running editorial programs and content... can be subsidised," said Mr Catalano. "They will be smart enough to support it."
Mr Catalano announced his shock departure from Domain in January. He remains a shareholder in both Fairfax and Domain.
“If Domain is to grow the business successfully, it has to reach all the market, and Nine absolutely complements the Fairfax audience, including mass audiences,” he said.
“Domain under a Nine umbrella, I think, would benefit from the enormous and highly skilled self-promotion they make of their own assets. [Nine's] incredibly good at promoting its own shows".
Mr Gordon, who is notoriously private and has built his media empire through a series of canny manoeuvres, is often viewed as an unpredictable dealmaker.
He surprised many media executives in September by purchasing a 15 per cent stake in regional broadcaster Prime Media at a time when the financial future of regional television is thought to be bleak.
Sources close to the Fairfax deal said there had been talks between Nine and Mr Gordon since it was announced.
While Nine shareholders do not get to vote on the deal, Mr Gordon's apparent support is a boost to the management teams and boards of both companies, who have unanimously endorsed the tie-up.
Nine's shares rose 6¢, or 2.7 per cent, following news of Mr Gordon's support, to close at $2.30. Fairfax advanced 3.5¢ or 4.3 per cent to 84¢.
Earlier this week, two key shareholders in Fairfax expressed doubts about the deal, saying Nine's bid was too low. The deal has also been criticised by unions and was condemned by former Prime Minister Paul Keating.
The merger was made possible by changes to long-existing cross-media ownership laws secured by the Turnbull government last year. It must be approved by the competition regulator, and 75 per cent of Fairfax shareholders, with a vote expected before the end of the year.
Under the terms of the deal, Fairfax shareholders will receive 0.3627 Nine shares and 2.5¢ in cash for each Fairfax share they hold. This implied a 22 per cent premium to Fairfax's share price the day before the deal was announced, or a price of 94¢.
But steeper than expected declines in Nine's share price since the deal was announced have eroded the premium Fairfax shareholders were due to receive, posing a potential threat to the merger.
Earlier this week, Mr Gordon was believed to have increased his economic interest in Nine, a move that may be designed to ensure he maintains influence at the bigger company if the merger goes ahead.
In addition to his 15 per cent outright shareholding in Nine, the Bermuda-based billionaire has a further indirect interest in Nine of about 5 per cent through equity swaps, believed to be through broker Deutsche Bank.
Jennifer Duke is a media and telecommunications journalist for The Sydney Morning Herald and The Age.
John McDuling is a business, media and technology writer for The Sydney Morning Herald and The Age.