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Australia’s Fairfax Media entered a trading halt this morning ahead of an expected announcement on its real estate business, Domain.
The statement, filed to the ASX today, has again stirred speculation the company could pave the way for a sale or partial sale of Domain, possibly through an initial public offering, when it reveals its interim results on Wednesday.
The Australian Financial Review, which is published by Fairfax, broke the news late on Monday the company has launched a strategic review of Domain, with a view to spinning it off into a separate ASX-listed entity in which it would retain a stake of around 60 per cent to 70 per cent.
Domain, which has been a star performer in Fairfax’s media suite thanks to a property boom in Australia in recent years, was responsible for 42 per cent of the company’s Ebitda in the 2016 financial year.
As a separate entity, Morgan Stanley has estimated Domain could be worth A$1.7bn, while Credit Suisse’s base case scenario is A$2.2bn (and $A3bn in the bull case). Fairfax’s current market capitalisation is A$2bn.
In mid-February, Fairfax announced the restructure of its metropolitan publishing division, which includes The Sydney Morning Herald and The Age mastheads.
Fairfax has taken the IPO route before with respect to some of its assets. In 2011 it sold part of its stake in Trade Me, its New Zealand classifieds business, via a float, before selling the remainder the following year. Amid further industry consolidation, Fairfax has proposed a merger of its New Zealand operations with New Zealand Media and Entertainment.
Fairfax shares closed on Monday at A$0.87 and are down 2.3 per cent so far this year versus a 2.2 per cent gain for Australia’s benchmark S&P/ASX 200.
Disclosure: The author is a shareholder and former employee of Fairfax Media.