Fairfax Media acquires final 50 per cent of Metro Media
Fairfax Media has moved on the next stage of its acquisition spree by buying the final 50 per cent of the issued shares in Metro Media Publishing Holdings (MMPH).
MMPH was set up in 2010 by former sales and marketing director Anthony Catalano, and holds the majority interests in 15 weekly real estate and lifestyle-focused magazines and newspapers in Victoria as well as reviewproperty.com.au.
Fairfax picked up 50 per cent of the publisher in 2011 for $35m, and has now paid with a combination of cash and Fairfax shares totalling $72m, including $18.5m in cash, to be issued post release of the Fairfax half-year 2015 results in mid February, for the other half of the business.
Fairfax CEO and managing director Grey Hywood said: “Domain is continuing its aggressive national expansion. The consolidation of the balance of the equity in MMPH simplifies the operations of our fast-growing property services businesses, which have more than $300m in real estate revenue.
“The consolidation enhances our rollout nationally of the agent equity model successfully pioneered by MMPH in Victoria.”
The acquisition follows on from Fairfax’s merger with Macquarie Radio Network, with the publisher taking a majority shareholding of 54.5 in a new enlarged listed entity in December.
The value of the shares to be issued is set at 78 cents per share which was the 45 day average of Fairfax shares up to December 31.
Catalano
Catalano will continue in his role as CEO of the Domain Group and the operations of MMPH will fall under his responsibility in the consolidated group.
He has chosen to take his pay-out in Fairfax shares, with MMPH’s founding real estate agent shareholders each taking 65 per cent of their payout in Fairfax shares.
Hywood said: “MMPH reaches one million households in Melbourne and Geelong every week via The Weekly Review magazines and Star Weekly newspapers and operates Melbourne’s fastest growing property portal, review.property.com.au.
“Since we formed the MMPH joint venture in December 2011 EBTIDA has increase from $4m in FY12 to $14m in FY14 and is on target for strong growth in 2015.
“The consolidation of MMPH caps a series of significant developments for Domain in the past 12 months,” Hywood said.
“In December 2012, we acquired property data and mapping provider, Property Data Solutions, and in July 2014 we acquired leading Canberra-based online property portal, Allhomes.”
Miranda Ward
Miranda Ward worked for Mumbrella from 2013 to 2017, eventually becoming deputy editor. Miranda joined Mumbrella in September 2013 from Sky News.
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Gobsmacking that Fairfax shareholders have watched this happen really. A brief review of history: Catalano leaves Fairfax to set up rival publishing business with Fairfax real estate clients. Fairfax goes ballistic. Time passes. Internecine war breaks out. Various Fairfax directors, two CEOs get booted. Former exec returns as CEO and buys half of pirate business, makes pirate head of key real estate division. Fairfax consolidates all real estate under pirate. Real estate trumpeted as Fairfax prime asset (largely because other assets wither dramatically). Fairfax buys remaining half of pirate business at hugely inflated value.
Fairfax directors should be very proud.
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Oh, @numbers, give ’em a break. The real estate/domain business is the only growth asset they have. (I reckon the money would have been better spent investing in something with bigger market footprint – eg an Asian digital property asset ). Question is, how long will they keep using it to subsidize the rest of the business ie the mastheads which, at best, are only marginally profitable and getting worse . Over last couple of years , the fairfax balance sheet has ben propped up by continuing deep cost cuts and asset sales and not by revenue increases. Obviously, there is a limit to both – they’re running out of costs to cut and assets to sell. And they won’t get back the $50m they have invested in STan IPTV venture with 9 anytime soon. In fact, with very high content costs, chances are they will need to sink more money in just to keep their product competitive
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I realise Greg Hywood has had a lot on his plate, but rather than be negative over MMPH, I reckon a close look at a couple of available ethnic radio network options, one Italian and one Middle Eastern to add to and round out what is now a quite powerful and attractive radio offering from Macquarie might be worth consideration.
Nothing wrong with acquisition where it makes sense, and they’ve done just that.
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@Minnie: Domain has been a growth “asset” partly because it has been absorbing the real estate revenues that used to be in other Fairfax “assets”.
This is why the ridiculous suggestions about selling Domain have never been fair dinkum.
The only growth in Fairfax is the overhead cost of execs and consultants.
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@Alan Robertson: have you looked at the Fairfax radio history? A debacle from the beginning: an acquisition no-one wanted them to make. The fact that Singo and pals have got them to the table says all you need to know. And if they spend another zac they should all be stripped of their Maseratis and frequent flyer points.
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@numbers: I realise what it looks like, but I know a bit more about radio and F’fax generally than the average F’Fax critic. Looking backwards doesn’t help. Macquarie’s expertise will turn the JV into a success and that won’t be without pain, but it’s my opinion it would be even better with a broader base of appeal into important ethnic markets, particularly the Middle Eastern. Worth thinking about.
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@Alan Robertson: looking backwards in the Fairfax case tells you the leadership has yet to produce a single value-creating initiative (aside from consultant-driven cost reductions) in living memory. If they had a record of husbanding resources and understanding niches your suggestion would be a great fit. But they don’t. In fact their typical strategies remain mass-bound in an era where the mass is with global aggregators. The central flaw with Fairfax is that leadership does not understand consumers or product requirements.
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@numbers: agree re oft-mooted sale of Domain. It’s a stupid idea – would leave Fairfax an exposed rump with assets of little or no value . And I take back whst I said about there being no revenue growth in fairfax. There has been revenue growth in – you guessed it – Domain
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@Minnie: as I said, Minnie, I’d love to see exactly how much actual growth is in Domain and how much is simply the re-allocation of revenues that once were real estate ads in the various Fairfax masthead P+Ls.
The next question: now that Catalano and his agent mates have capitalised their deals it will be fascinating to see how long the real estate client ad budget goes into Domain.
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