Fairfax’s decision to merge The Australian Financial Review with The Sydney Morning Herald and The Age business sections has claimed its second scalp. Business media boss Brett Clegg, who had long been frustrated by the restructure, left the company yesterday afternoon and will return to News Corp Australia.

Clegg is expected to be appointed News Corp’s NSW regional director, a role that would give him oversight of The Daily Telegraph, The Sunday Telegraph and a stable of community newspapers. That post has been vacant since May, when Michael Miller left to become CEO of APN News & Media.

Clegg’s exit follows BusinessDay reporter Paddy Manning’s departure in April after he penned an op-ed for Crikey blasting the merger. The creation of a standalone business media division is likely to lead to further editorial job cuts as Fairfax seeks to slash costs and duplication.

The departure of Clegg, who was formerly CEO of the Financial Review Group, has been on the cards since Fairfax boss Greg Hywood announced the restructure in April. Clegg’s new position — director of business media — expanded his reach to the metropolitan papers. But it also stripped him of commercial power, including profit and loss responsibilities. And he no longer reported directly to Hywood but to Australian Publishing Media head Allen Williams. He’d essentially been downgraded from a publisher to an editorial director — a big blow for a man long famed as an ad revenue “rainmaker”.

Sources say Clegg, who declined requests for comment this morning, had been courted by News Corp Australia boss Kim Williams since Williams took over in 2011. Clegg, a former Macquarie banker and deputy editor at the Fin, was poached by The Australian in 2010 as deputy editor (business) and was soon promoted to deputy CEO. But he lasted less than a year before returning to run the Fin Review Group. Clegg lured several top reporters — including James Chessell, Nabila Ahmed and Fin editor-in-chief Michael Stutchbury — from the Oz. But cash is in shorter supply now, making it less likely this defection will have the same pied piper effect. Crikey understands Chessell, for one, is staying put.

Unlike the last time he defected from the Fin to News, he won’t have to take any enforced “gardening leave”. Clegg will technically be a Fairfax employee for the next five weeks, but is expected to be rarely seen at the company’s Pyrmont HQ.

Clegg hadn’t hidden his unhappiness about the restructure, so his exit didn’t come as a shock to Fairfax’s more-plugged in reporters. But his replacement — SMH editor-in-chief Sean Aylmer — did. There was some hope among BusinessDay reporters this morning that Aylmer’s appointment means the merger will be less of a Fin “takeover”. While Aylmer has had senior roles at the Fin and BusinessDay, Clegg was seen as a Fin man through and through.

But some Fairfax bosses are pushing for a “one newsroom” strategy that would entirely merge the Fin and BusinessDay teams. This could provide a template for further consolidation — including in Fairfax’s Canberra bureau.

Fairfax’s director of news media Garry Linnell will serve as editor-in-chief of the SMH until a replacement is announced. Clegg’s departure will focus attention on the increasingly influential role of publishing media boss Allen Williams. Although Williams, who previously ran Fairfax NZ, is little-known he has amassed significant commercial and editorial power since taking on the job.

Crikey understands Clegg submitted quotes for Fairfax’s official statement yesterday, but they didn’t make the cut. The following quotes, which Clegg sent to several colleagues yesterday afternoon, have been circulating Fairfax widely today:

“I’m proud that I leave at a time when the AFR has such terrific momentum. From its phenomenal digital growth to diversification into broadcast and events, it is a masthead and business that will now only go from strength to strength.

“This decision is a very personal one and should in no way cast doubt on the great faith I have in my colleagues at Fairfax Media and the determination they all share to take the organisation into a successful future. They are an incredibly talented bunch of people with great passion and belief in what they are seeking to achieve.”

Clegg’s major moves at the Fin included ditching the website’s hard paywall, launching a Sunday TV show on Nine, aligning the paper more closely with the business community and expanding roundtable lunches and other moneymaking events.