Fairfax and Nine have announced a $4 billion merger that will create an integrated media giant across television, online video streaming, print, digital and real estate advertising — and erase the Fairfax name.

Key points: A merged Nine and Fairfax will be worth $4 billion

A merged Nine and Fairfax will be worth $4 billion Nine shareholders will own 51.1 per cent of the combined company, with Nine's CEO and chairman remaining in charge

Nine shareholders will own 51.1 per cent of the combined company, with Nine's CEO and chairman remaining in charge The two companies aim to achieve $50 million in annual savings through the merger

Nine will be the dominant partner, with its current shareholders holding 51.1 per cent of the merged company's shares, and the current Nine chief executive and chairman — Hugh Marks and former federal treasurer Peter Costello, respectively — leading the combined firm, which will be called Nine.

Fairfax will contribute three directors to a board of six.

Nine's offer to Fairfax shareholders includes 0.3627 Nine shares for each Fairfax share they currently own, and 2.5 cents cash per share.

The deal is around a 22 per cent premium to Fairfax's closing price of 77 cents yesterday.

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Fairfax's directors have unanimously recommended the deal, unless another company comes in with a better offer.

"The structure of the proposed transaction provides an exciting opportunity for our shareholders to maintain their exposure to Fairfax's growing businesses whilst also participating in the combination benefits with Nine," Fairfax's chairman Nick Falloon said in a statement.

The proposed merged media giant will include Nine's free-to-air television network, digital advertising businesses (such as Domain), streaming services Stan and 9Now, Fairfax's newspapers and online publications, as well as Fairfax's Macquarie Media radio interests.

Fairfax's investors reacted enthusiastically to the tie-up, sending the company's shares 12 per cent higher to 86 cents shortly after 11:00am (AEST).

However, Nine investors were not keen, pushing the company's share price 7.5 per cent lower to $2.33.

Major shake-up likely as merged company will slash costs

The companies said they anticipated annual cost savings of at least $50 million, to be implemented over the next two years.

Nine said it would "review the scope and breadth of the combined business, to align with its strategic objectives and its digital future."

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However, Fairfax chief executive Greg Hywood insisted news and investigations would remain central for the merged company.

"We are confident that the strength of the combined management team and staff will ensure the continuation of our quality journalism," he said in a statement.

Media analyst Steve Allen from Fusion Strategy said he did not think the deal would be the end of print for Fairfax.

"I think the move that they made last week in the announcement of the shared printing facilities with News Limited has extended the life of newsprint for a number of years, if not possibly for half a decade," he told ABC News.

"Certainly on the Fairfax side they suggested it would save up to around $15 million a year.

"I think print is perfectly safe. And with the might and power of cross-promotion and promotion on the Nine television network, it might very well start to attract new subscriptions."

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Mr Allen also said he believed it was unlikely there would be further mass job cuts at the merged company.

"Nine and Fairfax have been through that … I don't think in the operational, day-to-day level there'll be any loss of jobs," he said.

"In senior management there's bound to be some redundancies and changes."

'Why would two dinosaurs want to mate?'

Citi analyst David Kaynes thinks real estate advertising portal Domain is at the heart of the deal.

"In our view the transaction takes advantage of [Nine Entertainment's] elevated valuation to acquire a controlling stake in a high growth asset [Domain] and the rationale of combining TV and newspaper assets is secondary," he wrote in a note.

Fairfax has recently spun off its highly profitable real estate advertising business Domain into a company separately listed on the ASX, which Fairfax still owns around 60 per cent of.

Domain shares had jumped 8.6 per cent to $3.335 by 1:05pm (AEST).

Media analyst Peter Cox agrees that Nine shares are overvalued at the moment, allowing it to do a favourable deal.

"They did well last year, they became a threat, they got to number one in the advertising revenue and therefore the market's given them a lot of credence and a lot of value," he said.

"When you have an overvalued company, what you want to do is you want to buy other companies with your paper, not with cash — this is mostly a paper deal."

Beyond Domain, Mr Cox told News 24 that he does not see much long-term value for either company in the tie-up.

"These are what we call legacy companies — dinosaurs. Why would two dinosaurs want to mate?"

PMs past and present argue over deal's merits

A Fairfax-Nine tie-up was considered one of the most likely deals to be done after the Federal Government relaxed media ownership laws.

Prime Minister Malcolm Turnbull said the deal highlighted the necessity of the law change, saying the merger would strengthen both companies which were operating in a "tough, competitive" environment.

"Fairfax is a great Australian newspaper company, the Nine Network was the first television station to be on air," he told Tasmania Talks.

"I think bringing them together enables two strong Australian brands with great, long traditions to be more secure."

It was a very different response from former prime minister Paul Keating.

"The absence of those legislative barriers, in the media free-for-all the Turnbull government is permitting will, because of the broadly maintained power of those outlets, result in an effective and dramatic close down in diversity and, with it, opinion," Mr Keating wrote in an op-ed sent to various news outlets.

"The problem with this is that, in terms of news management, Channel Nine, for over half a century, has never other than displayed the opportunism and ethics of an alley cat.

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"There has been no commanding ethical or moral basis for the conduct of its news and information policy.

"Through various changes of ownership, no one has lanced the carbuncle at the centre of Nine's approach to news management. And, as sure as night follows day, that puss will inevitably leak into Fairfax."

Nine-Fairfax deal's hurdles

Any deal remains subject to shareholder approval from both companies, as well as a review by the Australian Competition and Consumer Commission, which it said is likely to take around three months to complete.

"The ACCC expects to commence a public review of the proposed merger, once it has received submissions and relevant information from Fairfax and Nine," a spokesperson noted in a statement.

"The purpose of the public review is to assess whether the proposed merger is likely to substantially lessen competition in any market."

The Media Entertainment and Arts Alliance journalists' union urged the ACCC to reject the merger proposal.

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"Today's takeover announcement is the inevitable result of the Coalition's Government's short-sighted and ill-conceived changes to media ownership laws that were always going to result in less media diversity," said the MEAA's media section president Marcus Strom.

"With ongoing inquiries into the independence and long-term viability of quality journalism underway, the ACCC must block this takeover."

However, media analyst Steve Allen cannot foresee any major competition concerns, given that the companies' assets are mainly on different media platforms.

"I think this merger will just go straight through," he said.