By Business editor Peter Ryan
Gina Rinehart's pursuit of editorial influence at Fairfax Media along with three boardroom seats seats is just one of the war fronts the embattled publisher is facing at the moment.
Now the third biggest holder of Fairfax stock is warning that the Sydney Morning Herald and The Age in Melbourne could be closed if the restructure announced on Monday fails to turn the company around.
The funds management group Allan Gray, which holds a nine percent stake, says Fairfax might be forced to sacrifice its metropolitan mastheads to focus on the more profitable rural publishing and digital businesses.
Allan Gray's managing director, Dr Simon Marais, told AM that The Age and The Sydney Morning Herald were in real jeopardy as Fairfax faces hard truths.
"I think the reason you buy Fairfax is not for the metro papers. They've got lots of other assets. And I think the other assets are probably worth more than the current share price," Mr Marais told AM.
"What the market's effectively saying is the metro papers are already worth less than nothing. They're a liability. But if that continues you'll probably just shut them down at some point. I think that's a real possibility."
Dr Marais identified standalone businesses outside of Fairfax's traditional publishing as worth saving such as Trade Me, Domain.com and Stayz.com.
Dr Marais made no apologies for taking a brutal approach to Fairfax's future given Monday's restructure which will axe 1900 jobs, close printing presses and convert The Age and SMH to tabloid formats.
And he signalled concerns about media diversity in Australia were an important but side issue for investors.
" I think over time if you don't have a good product you won't be able to sell it. But I think at some point it's unfair to expect a small portion of investors, mainly super funds, to pay for media diversity," Dr Marais said.
"I think the reality to people must be if you stop buying papers you won't have those papers."
Dr Marais said he was "neutral" about Gina Rinehart's bid for three boardroom seats and the right to intervene on editorial matters.
" You never have a right to a boardroom seat. But I think all other things being equal, it's better to have somebody with a lot of shares being a director than somebody that has no shares," Dr Marais said.
" I think if she say the board is being deficient or inefficient, and it's probably a reasonable thing to make, then I think one should listen to her."
But Dr Marais signalled he was concerned that Mrs Rinehart's bid for editorial sway could be damaging to the product.
"I think if you don't have an independent newspaper it's unlikely that people will buy it after a while so you could damage the value of it.
"But I think on the other hand she does make a fair point in saying she thinks a lot of the journalism and the articles we see are nice to have but they're not generating revenue and they should be culled. And we would agree with her on that stance."
Fairfax Media has been briefing a range of institutional investors about the restructure and its importance to the future of the company.
Fairfax Media shares dived 8.5 per cent yesterday to 59 cents, which is close to its record low.