Fairfax NZ buys out profitable Neighbourly as alternative strategy takes shape

Fairfax New Zealand, which is rebranding it as its flagship news website Stuff, has taken control of the hyper-local Neighbourly website for an undisclosed sum in what's emerging as an alternative strategy for the media group if a planned merger with NZME can't go ahead.

The local unit of ASX-listed Fairfax Media Group yesterday acquired the remaining shares it didn't own in Neighbourly, having first bought a 22.5 percent stake in December 2014. Over that period, Neighbourly's membership has swelled to more than 500,000 from 62,000 and the website was singled out by group chief executive Greg Hywood as a now-profitable business that created a "real opportunity the future" of the New Zealand division.

"Acquiring Neighbourly was perhaps a risk for a business that had been focused on traditional publishing, but its undeniable success has shown us the value of exploring and developing new ways to support our core business of journalism," Fairfax NZ chief executive Sinead Boucher said in a statement. "We are incredibly grateful for the hard work (Neighbourly co-founder) Casey (Eden) and his team have done evolving Neighbourly, as it is now a key way for our journalists to connect with communities across New Zealand, talk to them about what matters locally, and keep them informed."

The deal was closed the same day Fairfax NZ announced plans to shrink the size of its daily broadsheets to tabloid from the middle of next year, shrinking not only the size of the paper but also the associated printing costs. The compact format has been adopted by publishers around the world to reduce their printing costs, including at NZME's flagship masthead the New Zealand Herald.

Fairfax NZ has progressively lifted its stake in Neighbourly since the first investment, and as at June 30, 2016 placed a $4.6 million value on its joint ventures being 45 percent of Neighbourly and 25 percent of the KPEX shared advertising exchange. That year Fairfax NZ registered a $1.3 million loss from its share of joint ventures and was owed $350,000 from Neighbourly in a related party loan.

Boucher took over the reins as New Zealand CEO earlier this year, but has had a pivotal role in redirecting the publisher's focus in a digital-first strategy when she was head of news.

When the Australian parent reported its annual result in August, group chief Hywood told analysts the New Zealand business was "very, very interesting" given stuff.co.nz's monthly audience of 2.1 million people, calling it a "tremendous digital growth platform". The group has enjoyed success with its digital investments such as the float of Trade Me and plans to replicate that with a similar plan demerging its Domain real estate listings group.

Fairfax NZ has also secured complementary businesses with that digital push, taking a controlling stake in NZ Fibre Communications, better known as Stuff Fibre, and a minority stake in electricity provider Future Energy New Zealand, creating the ability to bundle content, telecommunications, and energy in a single package.

However, Fairfax NZ's bid to raise the threat of digital advertising giants such as Google and Facebook as threatening the viability of newspaper publishers when pitching a merger bid with NZME to the Commerce Commission failed to convince the regulator such a deal was in the public interest. The two media companies recently appealed the decision in Wellington's High Court, and are waiting for the decision.

(BusinessDesk)