$40m cost of freedom for MMG

But MMG will pay up because the removal of Macquarie as manager would trigger a poison pill: a fresh 1.5 per cent base fee plus a performance fee built into a separate asset advisory agreement.

The media fund expects it will cost just $4.5 million to manage itself inhouse after paying Macquarie $11 million last year.

The deal was approved by a sub-committee of independent MMG directors, some of whom work for other Macquarie businesses.

MMG is the latest Macquarie satellite, after Macquarie Airports, to cut its ties given investor distaste with the debt-filled external manager model. Macquarie Infrastructure Group is expected to follow suit.

Announcing a $294 million capital raising to cut debt, MMG said its boss, Mark Dorney, is leaving to become an executive director at Macquarie Capital. The operations head, Rhys Holleran, will become chief executive.

In August auditors questioned the fund's ability to remain a going concern as it needed to refinance about $1 billion in debt over the next year.

The independent directors who approved the deal said it would remove investor concern about externally managed listed funds.

MMG said the directors "satisfied the independence criteria" despite some working for other Macquarie entities. Michael Hamer is a director of the Macquarie International Infrastructure Fund. Bob Richards is a director of entities in the Macquarie Special Situations Fund. Leon Pasternak is a partner of law firm Freehills which has previously advised MMG.

As well as the termination fee, Macquarie will receive $2.8 million as joint lead manager, a fee for underwriting the offer and has a role in MMG's debt refinancing. It stands to earn part or all of another $11.4 million annual fee for managing the fund until the deal is complete, which may take until December next year, depending on talks with lenders of its troubled US businesses. Macquarie is one of the lenders.

MMG said its decline in earnings had slowed. In the three months to September 30, revenue fell 5.6 per cent and pre-tax earnings were down 5.1 per cent. The fund posted an $85 million loss last year, hit by writedowns at its US newspapers. Conditions facing American Consolidated Media remain "challenging" and MMG expects to breach covenants with lenders allowing them to take control.

An independent expert found the deal fair and reasonable.