Fairfax to shrink by more than half after Domain Group split

Fairfax’s equity value will be likely more than halved after the Domain Group splits, with the move costing around $14 million, the company revealed in its shareholders’ explanatory booklet released today.

The split would see Fairfax fall from its current position of 113th on the ASX200 to around 165th, around the same size as Southern Cross Media, while Domain would likely enter the index at 155th, roughly the same as Nine Entertainment.

Fairfax CEO Greg Hywood

Released ahead of the shareholder meeting scheduled for October 31 in Sydney, the booklet detailed the financial position of Domain Group and the effects the split will have on Fairfax.

The company estimates Domain leaving Fairfax would see the parent company lose 16% of its revenue and 33% of profits.

Based on its equity, a post-separation Fairfax would likely fall below both Domain and Nine Entertainment group with a market value of around $970 million.

Fairfax's divisional financial breakdown

Fairfax’s divisional financial breakdown

When formally announcing the proposed split in August, Fairfax CEO Greg Hywood laid out the benefits he saw to shareholders in the deal.

In the covering letter to the booklet, Fairfax chairman Nick Falloon said an “increasing focus on each business’ distinct growth agendas and strategic priorities through the support of a dedicated board and management team” would enhance shareholder value over time.

With Fairfax’s board estimating the Australian property advertising market at approximately $826 million in the 2017 financial year with compound annual growth of 17%, it is unsurprising Domain Group will have a higher market valuation.

The actual market value will depend upon how investors will treat the two companies’ market prospects, particularly in light of the Australian property market’s outlook.


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