Australian media giants Nine Entertainment and Fairfax have agreed to merge, creating what they say will be the nation's "largest integrated media player".

The surprise deal, worth an estimated A$4bn (2.25bn; $3bn), gives Nine Entertainment a 51.1% stake. The new business will be called Nine.

Australia has a highly consolidated news media market.

The loss of the name Fairfax, a company founded in 1841, was lamented by many.

The deal wraps in Nine's television network, one of the nation's biggest, and Fairfax newspapers including The Sydney Morning Herald, Melbourne's The Age and The Australian Financial Review.

It also includes Fairfax's many radio and digital assets, including news websites in other cities and property listings business Domain.

Current and former Fairfax employees joined others in expressing sadness about the deal.

The merger will create at least A$50m in cost savings over two years, the companies said. They did not say if this would include job losses.

Fairfax chief executive Greg Hywood said: "There will be plenty of Fairfax Media DNA in the merged company and the board."

The deal needs to be approved by shareholders and market regulators, but is expected to be completed by the end of the year.

Media concentration

Australia relaxed its media ownership laws last year. Previously, proprietors had been prevented from owning newspapers, radio and TV stations in the same city - an arrangement to protect diversity.

Prime Minister Malcolm Turnbull said the deal on Thursday had been made possible by his government.

"[It] allows two strong Australian brands with great traditions to be able to be more secure," he said.

Like other newspaper companies around the world, Fairfax has struggled financially in recent years due to declining revenues.

Its board unanimously called on investors to approve the deal, arguing it created "compelling value" for shareholders.

"Both Nine and Fairfax have played an important role in shaping the Australian media landscape over many years," Nine chairman Peter Costello said in a statement to the Australian Securities Exchange.

"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."