Domain to spin off from Fairfax Media and list
21 Feb 2017
Fairfax Media (ASX: FXJ) looks set to spin off Domain Group, its real estate business, as a separately listed entity on the Australian Securities Exchange (ASX). Earlier today, Fairfax Media issued notice of a halt in the trade of its shares on the ASX.
Rumours that Domain would be sold have persisted for years, but were reignited last year when Fairfax split Domain’s financials from the rest of the group, and again when Domain moved out of the Fairfax building to their own Pyrmont offices.
The trade halt came a day after The Australian Financial Review (subscription required) speculated that Fairfax Media was seeking advice on how to sell its classifieds business.
However, AIM Group understands that a separately-listed entity will remain under Fairfax Media’s control, with the company expected to retain between 60 percent and 70 percent of Domain Group.
According to the Australian Financial Review, the split is aimed at enabling the market to place a proper value on the Domain business, which has long been considered the most valuable part of the Fairfax Media group.
In FY2015/16, Domain contributed $120 million AUD ($92 million U.S.), or 42 percent, of the total earnings of Fairfax of $283 million AUD ($217 million U.S.).
It’s expected that Domain will post earnings before interest, tax, depreciation and amortization (EBITDA) of $127 million AUD ($97.3 million U.S.), when the company releases its financial results for H1 of FY2016/17 on Wednesday (later today).
Based on that forecast, Credit Suisse estimated that – as a separate entity – Domain could be worth around $2.2 million AUD ($1.7 million U.S.), a figure based on the same multiples applied to REA Group, Domain’s rival.
If the separation goes ahead, which The Australian Financial Review reported would be completed by the end of the calendar year, existing Fairfax Media shareholders will receive all of the stock in the new Domain entity.
Fairfax Media is not expected to raise capital with the separation, although it may sell down its Domain stake, as it did with New Zealand classified business Trade Me, which Fairfax spun off in 2011 and exited in 2012, to cut its debt load.
It’s believed that Antony Catalano, current Domain CEO, will stay on as CEO of the separately-listed Domain. Since taking the helm in 2013, Catalano instituted a raft of changes to the Domain brand, including the launch of a satirical web show, and a weekly print magazine in Geelong. The past weekend saw the launch of a “new-look”, high-gloss magazine.