Fairfax considers bid to buy Domain for $1.8 billion US

07 May 2017

Fairfax Media (ASX: FXJ), parent company of real estate site Domain, confirmed that the company had received an unsolicited offer over the weekend from a consortium, led by private equity firm TPG Capital, to buy Domain and three of the company’s newspapers.

Greg Hywood, CEO of Fairfax Media (photo from his LinkedIn page with thanks)

Greg Hywood, CEO of Fairfax Media, convened a board meeting at the weekend to consider the offer, estimated to be worth $2.5 billion AUD ($1.8 billion U.S.), to buy Domain and its Metro Media division, consisting of Sydney Morning Herald, the Age, and The Australian Financial Review.

In a statement, Fairfax said the consortium, made up of U.S.-based TPG Capital and the Ontario Teachers’ Pension Plan Board, had made a cash offer of 95 cents AUD per share.

The proposal came days after Fairfax announced plans to save $30 million AUD by axing 125 jobs from its Metro Media division, prompting week-long strikes by the majority of the company’s journalists.

Fairfax said the board was considering the proposal, but added: “There is no certainty that the Indicative Proposal is capable of being implemented, given the complexity involved in splitting the businesses.

“Regardless of any potential proposal, the Fairfax board believes Fairfax has a very attractive future, and that the company is well-positioned to continue to deliver shareholder value.”

Domain was the only Fairfax division to grow its revenue in the 17 weeks since Christmas; it was up 10 percent overall.

It’s understood the TPG-led consortium has an interest in growing the Metro Media division mastheads, which it sees as key to extending Domain’s reach, rather than cut them.

Hywood gave a trading update on May 4 (see image). Metro Media revenue had declined 11 percent since Christmas, he said at the Macquarie Australia Conference last week, while the group’s overall revenue was down 6 percent in the first 17 weeks of FY2017 from the same period last year.

Domain was the only division to increase revenue, with its digital business up 18 percent and overall revenue (including its print assets) up 10 percent in the 17-week period of FY2017 from the same period last year.

According to The Australian Financial Review, Deutsche Bank analyst Entcho Raykovski has an implied value on Domain of $2.2 billion AUD ($1.6 billion U.S.), and $17.6 million AUD ($13 million U.S.) for Metro Media.

TPG views the Fairfax Metro Media division as a valuable asset for Domain, which has been able to leverage the audience and reach of the metro mastheads, particularly in Sydney, where Domain’s online traffic is neck and neck with rival Realestate.com.au.

Raykovski estimates Domain’s print revenue will be around $91 million AUD ($67.3 million U.S.) this financial year, falling to $82 million AUD ($60.5 million U.S.) next year. Digital revenue are expected to grow from $229.5 million AUD ($170 million U.S.) this year to $268.6 million ($199 U.S. million) in FY2017/18.

In March, TPG had first shown an interest in acquiring a controlling stake in Domain, but was deterred by a spike in the Fairfax Media’s share price.

Left out of the deal, should it go ahead, is Fairfax’s community newspaper titles, New Zealand Publishing (which had its merger with fellow publishing group NZME blocked by the New Zealand Commerce Commission last week), its video-on-demand service Stan, and its stake in Macquarie Media radio.

The separation of Domain and Fairfax Media (announced in February) will go ahead as planned, and is expected to be finalized by the end of the calendar year, the company said.

Share

Angela Hawksford

Angela is a writer and journalist based in Sydney, Australia. She has extensive knowledge of the Australian real estate industry, having started her career in real estate advertising at News Limited newspapers, where she worked across a number of different mastheads in Sydney. She s also worked in television, magazines and online, and regularly contributes feature articles to The Sydney Morning Herald, MiNDFOOD and The Newcastle Herald. Angela also works as a content writer, creating written content for a number of SMEs across an array of industries, including real estate, education, technology and digital media.