The merged company, to be called Nine, will include Nine's free-to-air television network, Fairfax's mastheads including The Sydney Morning Herald and The Age, a suite of digital assets including a majority stake property listings portal Domain, subscription video platform Stan and 9Now, and Fairfax's radio interests through Macquarie Media.

The companies said they expected the merger to deliver annualised cost savings of at least $50 million over the next two years. On a call with analysts, Nine CEO Hugh Marks said most of the cost savings would come from support functions, rather than content creation.

"We won't go into detail of the cost synergies in terms of each department" he said. "The $50 million number - most of that will come outside of core content creation, but from duplication of services".

He also said Nine's board would be willing to adopt Fairfax's editorial independence charter. "It's an easy thing for us to subscribe to as a board," he said. "We have been in the journalism business for many years."

Under the proposal, Fairfax shareholders will receive 0.3627 Nine shares and $0.025 cash for each Fairfax share, implying a 21 per cent premium to Fairfax's closing price on Wednesday. Once the deal is completed, Nine shareholders will hold 51.1 per cent of the combined company, with Fairfax shareholders owning the remaining 48.9 per cent.

Mr Marks will run the combined company, and Nine chairman Peter Costello will remain chairman. However, in a note to staff, Fairfax chief executive Greg Hywood said "there will be plenty of Fairfax Media DNA in the merged company and the board".

Three Fairfax directors will join the board of the new company, with another two current directors from Nine.

“The proposed transaction for Fairfax reflects the success of Fairfax’s transformation strategy, which has created value for shareholders through targeted investment in high growth businesses, such as Domain and Stan, and prudent management of our media assets," Mr Hywood said. "The combination with Nine provides an exciting opportunity to continue to drive incremental value well into the future.”

Mr Marks said in a statement the merger would "add another dimension, creating a unique, all-platform, media business that will reach more than half of Australia each day through television, online, print and radio".

In a note to staff, Mr Marks described it as a “ground-breaking merger – harnessing the strength, assets, quality and reach of two of the country’s most famous industry brands”.

“Such a merger of two major media groups will of course result in some duplication of functions and you will read about synergies that will be pursued by the business as part of this transaction,” he said, though he stressed it was not about cost reductions.

Mr Costello said in a statement that both Nine and Fairfax had played "an important role in shaping the Australian media landscape over many years".

"The combination of our businesses and our people best positions us to deliver new opportunities and innovations for our shareholders, staff and all Australians in the years ahead," he said.

Fairfax chairman Nick Falloon said the deal represented "compelling value" for shareholders, allowing them to "maintain their exposure to Fairfax's growing businesses whilst also participating in the combination benefits with Nine".

Fairfax directors will recommend shareholders vote in favour of the scheme in the absence of a superior proposal.

Mr Falloon told Domain staff in an email it was “100 per cent business as usual” and he could see only “considerable upside” from the deal.

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