In early March an 11-page letter sent shockwaves through media giant NZME. Duncan Greive analyses its withering critique of the business, and the plan to redirect its news direction after ripping out the board.
New Zealand’s sharemarket is typically a fairly sleepy place. Stocks rise and fall, sometimes abruptly – but the battles for control seen in larger markets are rare. This is partly why the billionaire investor Jim Grenon’s 11 page letter to NZME’s shareholders caused such chaos when its existence became public in the early afternoon of March 6th.
As a listed company, NZME is legally required to update the NZX of material changes which might impact its share price – hence it noting that Grenon, who had only recently disclosed a substantial shareholding of almost 10%, had contacted other shareholders about replacing the current board. Yet NZME’s disclosure was remarkably coy about what else the letter contained. Particularly given that it represented an audacious attempt to take control of one of New Zealand’s most vital news organisations.
The Spinoff approached NZME requesting a copy, but was rebuffed. “The Board is committed to ensuring all shareholders receive complete and accurate information regarding Mr Grenon’s approach. This will take place once the Board has fully assessed Mr Grenon’s letter,” the company replied in a statement attributed to its chair, former ASB CEO Barbara Chapman. She went on to pointedly remark that “providing selective information in the public arena, or only to some parties, is not helpful to a fair and informed process”. It was a slight on Grenon’s approach, but otherwise the board has been fairly muted in its response.
Grenon himself declined our request for an interview – though left the door open. “I will think about it Duncan but I do have to be sensitive of other things unfolding. The time may come.” The story seemed to pause there for some days, with multiple attempts to contact NZME board members going unanswered. Grenon selectively engaged with business media, and some other shareholders came out in qualified support of his approach, including Roger Colman, a veteran NZME investor with files on the company stretching back in the Horton-owned era of the 90s.
Two shocking announcements
Last Friday afternoon, NZME provided a pair of market updates – the timing unavoidably raising eyebrows. The first arrived under the headline “response to speculation regarding Stuff”, and revealed “NZME confirms that it has had discussions with Stuff since late 2024 in relation to the potential acquisition of digital and print assets within the Stuff Mastheads business.” This was itself seismic media news, suggesting that iconic brands like The Post and The Press could become part of arch rival NZME’s stable. NZME’s market announcement said that Stuff paused those discussions as news of Grenon’s approach became public.
The news regarding Stuff seemed designed to draw oxygen and attention from the second, which arrived in the notorious bad news drop zone of 4.30pm Friday – still technically during business hours, but with most bosses and reporters nearly done for the week – when NZME released the full text of Grenon’s letter. It runs to 11 pages and almost 5,000 words. While it is Grenon’s views on journalism which have attracted most commentary in recent weeks, the letter is chiefly notable for a withering view on NZME’s performance as a business, and perceived failings of its board and executive.
A damning review
The letter lays out what Grenon describes as “years of poor performance, bloated costs and weak public disclosure”, which has motivated his advocacy for the dismantling of the current board. He goes on to say that “I feel substantial change is needed that the current team is not going to pursue for two main reasons. One, they should have done so already and, two, it is against their interests as beneficiaries of NZME’s high-cost structure, most obviously at the management level.”
Since news of Grenon’s approach broke there has been a consistent stream of speculation about the impact of his new regime on the Herald’s journalism. Concern has been particularly high within the E Tū union, which represents a number of Herald journalists. The “plan to replace most members of the NZME board with the aim of focusing on operational aspects of NZME remains very concerning for us,” union delegates wrote in an open letter to Grenon. “Decisions on content in our mastheads, broadcasting and digital outlets need to be fully independent and free from board level direction.”
This contention has been rejected by Grenon, and it is striking how little reference there is to journalism in the letter. “My intention is that more quality content should be produced, not less,” it reads. “This is needed to attract new subscribers.” Grenon also notes that the bizarre “setting a new tone for New Zealand” slide in the annual results was not at his behest (which begs the question: who did want that slide?).
“In contrast to NZME’s recent announcement to ‘set a new tone and build positive social momentum for New Zealanders’, our proposal will lift the company’s journalistic standards, resulting in the production of higher quality news content, characterised by independent, trustworthy and balanced perspectives,” Grenon wrote.
However, there is a second Grenon letter, this one addressed to E Tū’s leader, former senior Labour minister Michael Wood. The Spinoff has obtained a copy, which is perhaps his clearest statement yet of his intentions regarding the Herald’s journalism. Parts of it are uncontroversial, even comforting. “I have reviewed NZME’s current Editorial Conduct and Ethics Policy in detail and can confirm my agreement with all of the principles that are outlined: Accuracy, Independence, Opinion, Editing, Diversity and Conduct/Integrity.”
Yet there are other elements which will chill journalists, and potentially Herald readers, such as point five outlined below, which suggests Herald journalists promoted the three waters legislation to the point that it became a recruiting tool for the Taxpayers’ Union. How Grenon’s desire for a more operationally involved board will square with commissioning and editing remains the biggest source of fear and conjecture within this saga.
The original 11-page letter to NZME shareholders largely stays away from journalism, and its media analysis is sophisticated, with even some within NZME conceding that the questions raised have real substance. Another NZME staffer said that the board and management had lost significant support from the company’s journalists through the recent “pivot to video”, which saw the company favour an online news channel and resulted in a number of the Herald’s most admired and awarded journalists leaving the business.
That said, there remains significant scepticism about Grenon’s intentions around news, with two broad views emerging. One is that he will drive a renewed focus on journalism that drives subscriptions versus ad impressions, and a reduction in clicky reporting and opinion writing, all of which might not be a bad thing. The second is less sanguine, and suggests that there is a gap between Grenon’s public statements and private beliefs – typified by the preoccupations of his prior startup The Centrist – that will become clear once he achieves effective control of the board.
The business of news
The vast bulk of the letter to NZME is focused not on news, but on the business side of company – and the quality of its communication to markets and investors. As The Spinoff and others have speculated, the driving commercial impetus is to break the company up so as to maximise the value and potential for investment of OneRoof, NZME’s property portal. “Likely the preferred route for the new board would be to have the shares of OneRoof distributed out to current shareholders for it to be its own public listing.”
This idea was floated for exploration at NZME’s annual results presentation – a rare point of approval from Grenon. He does raise some crucial complexities, including how reliant it is on traffic delivered by the Herald homepage, a critical question for any independent OneRoof shareholder.
Grenon is particularly pointed about how much information has been conveyed in the NZME’s annual results. He calls out the vast Covid-19 ad campaign, which spent over $100m across various local and international brands and platforms over three years.
“I have no way of knowing the advertising number in spite of its importance to earnings… but I would be surprised if it was not at least $20M, in extra margin, through the COVID period… It is obvious to anyone living in New Zealand that the government advertising through COVID was off the charts. I feel some effort to explain the magnitude was warranted, but did not occur.” This is a common gripe of many who’ve lost trust in news, but Grenon takes care to focus on its impact on trading performance, versus conspiratorial ideas about the closeness of the Ardern government to journalists.
He also used a graph to show the movement of the share price allied to the thematics he identifies.
Grenon’s view of the Herald’s agreement with Google is dim. “The company is silent on the financial impact of the agreement with Google. I view the amount Google is paying NZME to be an attempt to stave off government legislation, as opposed to an agreement Google is getting value from and that they are therefore costs they are happy to incur.” This is perhaps a rare area of alignment with the chair he seeks to replace – Chapman is also deputy chair of the NZ Initiative thinktank, which has vigorously lobbied against the Fair Digital News Bargaining bill.
He reserves a particularly harsh critique for current CEO Michael Boggs’ salary. “At the top end, the CEO compensation is much too high relative to the size and complexity of the business, averaging over $2.25M per year for the past three years.” Grenon contrasts this with staff cuts and churn lower down in the business. “There are high levels of employee turnover with, on average, over 200 new employees added each year for the past three years. That does not suggest a happy work environment and we want to improve on that.”
Towards the end of the letter, Grenon nods at cost savings. “We expect to find significant cost reduction in the high-cost employees and executive ranks. It is easy to understand why existing management has been resistant in this area. We also hope to find many in the existing NZME staff that can work and thrive in the new paradigm, which will provide opportunities for some to advance. This type of transition can be stressful on staff but it can be ameliorated with lead time and programs to help people adapt.”
He ends with what reads like an appeal to current staff to trust him – if only because, according to him, the devil they know might be worse. “Is the current environment any better,” he asks, “since they already have periodic layoffs and enormous staff turnover?”
Many in and around NZME are resigned to Grenon succeeding. The board has been publicly quiet, and while they are talking to investors too, if anything, Grenon’s support seems to be growing, with the NBR yesterday suggesting Grenon is rumoured to be backed by well over 50% of shareholders. There have been whispers of a high net worth individual investing to block the billionaire, but such an exercise would be costly, and success far from certain. As of today, a little over a month out from a pivotal AGM, it looks like one of the most audacious corporate takeovers in years will go ahead without much of a fight.
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