PUBLIC VERSION COMMERCE ACT 1986: BUSINESS ACQUISITION SECTION 66: NOTICE SEEKING CLEARANCE Date: 1 November 2013 The Registrar Market Structure Team Commerce Commission PO Box 2351 Wellington Pursuant to section 66(1) of the Commerce Act 1986 notice is hereby given seeking clearance of a proposed business acquisition. DOC REF 15763084_2 Clearance Application PUBLIC VERSION Part 1: Transaction Details 1. The acquirer 1.1 Details for Bauer Media Group (NZ) LP Name and position of person Paul Dykzeul responsible for giving this Chief Executive Officer Notice: Registered office: City Works Depot Shed 12, 90 Wellesley Street Auckland 1010 New Zealand Postal Address: Bauer Media New Zealand Head Office Private Bag 92512 Auckland 1010 New Zealand Physical Address: Bauer Media New Zealand Head Office Shed 12, 90 Wellesley Street Auckland 1010 New Zealand Telephone: +64 9 308 2700 Fax: +64 9 308 2878 Website: http://www.bauermedia.co.nz Contact Person: Paul Dykzeul Chief Executive Officer +64 9 308 2879 Email Address: [email protected] 1.2 In the first instance please contact: Name: Torrin Crowther and Penny Pasley of Bell Gully Email Address: [email protected] [email protected] Telephone: +64 9 916 8621 +64 9 916 8715 DOC REF 15763084_2 Clearance Application 2 PUBLIC VERSION 2. The seller Registered office & physical APN Specialist Publications NZ Limited address: 46 Albert Street Auckland New Zealand Postal Address: PO Box 32 Shortland Street Auckland 1140 New Zealand Telephone: +64 9 373 6616 Fax: +64 9 373 6528 Website: http://www.apn.co.nz/ Contact Person: Phil Eustace Finance Director APN New Zealand Email Address: [email protected] In the first instance please contact: Name: Alan Lear, Barrister Email Address: [email protected] Telephone: +64 9 366 4623 3. Interconnected and associated entities 3.1 The applicant is Bauer Media Group (NZ) LP (Bauer). Bauer has four core divisions: Bauer Magazines, Trader Group, Property Magazines and Netlink Distribution. 3.2 Bauer is a limited partnership and was registered on 21 December 2012. It is a wholly owned subsidiary of Heinrich Bauer Verlag Beteiligungs GmbH (HBBH) which acts as the Limited Partner of Bauer. HBBH also own Bauer Media (NZ) Limited, and this entity is the General Partner of Bauer. The wider Bauer Group, which has been managed by the Bauer family since its inception 137 years ago, is active in 16 countries worldwide. 3.3 Netlink Distribution (Netlink) is a trading division of Bauer. Netlink currently represents 33 different publishers in the New Zealand market, distributing publications to retailers across the country. 3.4 A structure diagram of Bauer is attached as Schedule 1. 3.5 The seller is APN Specialist Publications NZ Limited (APNSP), which operates APN’s magazine business. The other main operating companies are APN New Zealand Limited, which publishes and prints The New Zealand Herald and provincial newspapers, and APN Online (New Zealand) Limited which runs the digital side of the business including The New Zealand Herald Online and GrabOne. These companies (collectively A P N NZ) are ultimately owned by APN News & Media Limited, a company listed on the Australian and New Zealand stock exchanges. DOC REF 15763084_2 Clearance Application 3 PUBLIC VERSION 4. The proposed acquisition 4.1 Bauer is seeking to acquire all of the assets used by APNSP in the publication of the New Zealand editions of the following owned magazine titles: (a) New Zealand Woman’s Week l y ; (b) Simply You; (c) Simply You Living; (d) NZ Listener; and (e) Crème. 4.2 Bauer is paying [CONFIDENTIAL1] for the relevant assets. 4.3 In addition to its various other media properties, APNSP will retain the following licensed magazine titles: (a) New Idea; (b) That’s Life!; and (c) Girlfriend. 4.4 The licensed magazine titles are owned by Pacific Magazines, the magazine publishing arm of Seven West Media Limited, Australia’s largest diversified media network, which also incorporates Australia’s largest television network. While Pacific Magazines retains ownership of the masthead, APNSP uses editorial teams separate from its other magazine titles to produce the content (some of which is obtained from the Australian edition), solicits advertising, sets the price and retains the advertising and cover price revenue. APNSP pays a licence fee to Pacific Magazines. The term of the current agreement is due to expire on [CONFIDENTIAL] with a right of renewal for a further [CONFIDENTIAL] years. 5. Commercial rationale for the transaction 5.1 The magazine industry is in decline. Alternative sources of content (many free) continue to cause declining readership. Alternative advertising platforms are causing declining advertising revenues, exacerbating the revenue impacts from the declining circulation. Magazines’ share of total advertising spend has fallen from 11.7% at its peak in 2005, to 9.7% in 2012. In dollar terms, total magazine advertising revenues fell by 20% between 2005 and 2012.2 5.2 In the face of such decline, Bauer has two options: (a) spread its costs over a greater revenue stream (as this transaction seeks to do); or (b) [CONFIDENTIAL] 6. Transaction documents 6.1 Please see confidential Annex 1 for a copy of the Sale and Purchase Agreement. 1 Subject to adjustment. 2 Source: ASA industry data http://www.asa.co.nz/stats.php. DOC REF 15763084_2 Clearance Application 4 PUBLIC VERSION 7. No overseas dimension 7.1 This is a New Zealand only transaction and hence no other competition agencies have been notified. DOC REF 15763084_2 Clearance Application 5 PUBLIC VERSION Part 2: The Industry 8. Goods and services supplied by the merger parties Bauer 8.1 Bauer operates four core divisions (with aggregation occurring o n l y in relation to magazines): (a) Bauer Magazines: (i) Bauer publishes the following New Zealand titles: Woman’s Day, The Australian Women’s Weekly (NZ Edition), NEXT, Fashion Quarterly, Metro, CLEO, Taste, North and South, KiaOra, HOME, Your Home and Garden, Good Health Choices, Little Treasures and Recipes+. (ii) Bauer also imports into New Zealand (from Australia) Bauer titles including New W eek ly, Lucky Break3,Cosmopolitan, Dolly, Harpers Bazaar, Australian House and Garden, Australia Top Gear, and Zoo4. (b) Trader Group: is the trade publishing division of Bauer and includes magazines and websites Auto Trader, Deals On Wheels, Motorcycle Trader & News, Trade-A-Boat, Farm Trader and NZ Motorhomes, Caravans & Destinations. (c) Property Magazines: produces the Property Press and operates the Property Press website. (d) Netlink Distribution: distributes Bauer and independent third party publications to retailers in New Zealand. 8.2 See http://www.bauermedia.co.nz for further details on Bauer. APN News & Media 8.3 APN News & Media has a diverse portfolio of media assets across Australia and New Zealand and is listed on the New Zealand and Australian stock exchanges. It publishes 20 daily and more than 100 non-daily newspapers across Australia and New Zealand.5 8.4 APN has “a portfolio of newspaper, digital and magazine titles that engage with almost 2.7 million people every week”6 across both digital and print platforms. APN’s New Zealand portfolio includes The New Zealand Herald and regional newspapers, along with the recent launch of its own news service APNZ, in partnership with independent daily publishers. APN’s response to the issues facing print media has been to increasingly focus on its digital offerings. Consistent with this approach, it owns online sites such as the NZ Herald Online and GrabOne. 8.5 Relevantly, and in addition to its core newspaper and online content, APN NZ will continue to publish the following titles: New Idea; That’s Life!; and Girlfriend, as well as the various magazines which it inserts into its newspapers (NIMs) including CanvasMagazine; VIVA; T im e Out; Living; Travel; Weekend Magazine; Element and Bite. 3 Lucky Break is now produced in Australia with limited New Zealand content feeding into the overall magazine. New Zealand advertisements are added before the magazine is printed and circulated in New Zealand, though these account for only approximately 3 out of the overall 64 pages of the magazine (less than 5%). 4 A full list of Australia Bauer titles imported into New Zealand can be found at Schedule 3. 5 http://www.apn.com.au/. 6 APN Annual Report 2012, pg 9: http://media.corporate-ir.net/media_files/IROL/14/144006/2012_Annual_Report.pdf. DOC REF 15763084_2 Clearance Application 6 PUBLIC VERSION 8.6 With joint venture partner Clear Channel Communication Inc (USA), APN also owns the Australian Radio Network, which in turn wholly owns The Radio Network New Zealand. The Radio Network has three of the top five national radio stations in New Zealand, with NewsTalk ZB, Classic Hits and Coast. APN NZ operates a printing division (APN Print) which nowadays is limited to printing its newspapers. APN NZ also has an indirect 50% shareholding in the street furniture provider, Adshel New Zealand Limited (which offers advertising space in bus shelters). APN NZ’s corporate structure is provided as Schedule 2 (APN NZ has since sold its interest in APN Outdoor Limited). 8.7 See http://advertise.nzherald.co.nz/ for further details on APN NZ. 9. Affected industries 9.1 There are approximately 3,000 magazine titles for sale in New Zealand. Approximately 300 of these are published in New Zealand, with the remainder imported from overseas, primarily from Australia, the United Kingdom and the United States. 9.2 Magazine publishers operate in a two-sided market, earning revenue from sales of advertising space to advertisers and sales of magazines to customers. 9.3 On the advertising side, the main clients are advertising agencies and media buyers (acting on behalf of advertisers) and major advertisers.