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Fairfax Media confirms Domain separation with real estate business to list separately on ASX

Fairfax Media has confirmed it is preparing to separate the Domain Group into a new Fairfax-controlled Australian Securities Exchange-listed entity.

The announcement to the ASX this morning follows on from a trading halt yesterday which fuelled reports the separation was imminent.

The separation would result in Fairfax Media – which also publishes The Sydney Morning Herald, The Age and The Australian Financial Review – continuing to own a controlling majority of Domain (between 60-70%) and issuing shares in Domain to Fairfax shareholders at the time the separation is implemented.

Domain listing as a separate entity on the ASX is expected to be completed this calendar year.

The announcement comes as Fairfax Media reveals its financial results for the six months ended December 31, with Domain’s revenue up 5.8% overall from $153.9m to $162.9m.

Fairfax Media chairman Nick Falloon said: “This strategic initiative arises from the Board’s determination to maximise returns for Fairfax shareholders from Domain Group, which is positioned for strong long-term growth.”

According to Falloon, a separately listed Domain Group would allow a direct valuation of Domain and the opportunity to attract new shareholders with different investment criteria.

Fairfax Media CEO Greg Hywood said: “The separation of Domain would further reshape the Fairfax portfolio by adopting a more flexible corporate structure to maximise shareholder value. Importantly, Fairfax would continue to benefit from the strong long-term growth profile of Fairfax through its continuing shareholding of 60% to 70%. The current intention is that no new capital would be raised.”

Domain CEO Antony Catalano will continue to lead the Domain Group, Hywood said.

“The time is right for Domain to consider taking this next step. It has achieved the scale in revenue, earnings and audience needed to operate as a standalone listed entity,” Hywood said.

“Domain Group CEO Anthony Catalano will continue to lead the exceptionally talented management team which is driving the strong performance of the business.

“Domain is well placed as it continues to strengthen its platform and position itself at the centre of Australia’s real estate ecosystem. By building on its core strength as a listings business, Domain is capturing new revenues from all aspects of people’s involvement with property.”

Post separation, Domain will incur a number of costs and adjustments not currently reflected in its segment financials.

Based on preliminary estimates these are expected to be approximately $8m-$10m per year, consisting of:

  • Incremental $4m board, listing and other costs associated with Domain becoming a standalone entity;
  • $4m-$6m reflecting the transfer of corporate costs currently borne by Fairfax but attributable to Domain, and commercial agreements with Fairfax for certain services

The Domain separation will be subject to a number of conditions including a Fairfax shareholder vote.

Macquarie Capital has been appointed to advise on the proposed transaction.

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