Fairfax to proceed with Domain listing as TPG Capital and Hellman & Friedman pull out
Fairfax Media will spin off Domain as a separate entity on the Australian Securities Exchange, confirming it had not received a binding offer from equity houses TPG Capital and Hellman & Friedman.
The news comes after TPG Capital – which kicked off the bidding for the media company at almost $2.5bn – had decided not to proceed after looking at the state of Fairfax’s books.
It also follows Hellman & Friedman’s decision not to enter a final bid by Friday’s provisional deadline.
Both parties had entered Fairfax’s online data-room, to see up-to-date information about Fairfax’s current performance, as part of the due diligence process.
In a statement made to the ASX this morning, Fairfax Media confirmed it had not received a binding offer from either equity house, and had ceased discussions with both parties.
Fairfax Chairman, Nick Falloon, said The Board has appreciated the shareholders’ support for Fairfax’s current strategy.
“That support has been communicated during this process with a strong desire for Fairfax to progress the Domain separation and to continue to executive on its plans.
“The Fairfax Board believes the Company is well positioned to continue to deliver substantial returns for shareholders into the medium and long-term future.
“With media reform expected later this year, Fairfax will actively look to maximise value given the strategically important businesses we own,” Falloon said.
Fairfax noted it would move ahead with plans to list Domain as a separate entity on the ASX, as announced in February.
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.
According to the February announcement, the separation is expected to be completed this calendar year.
At the time of the initial announcement, Falloon said the separate listing would allow a direct valuation of Domain and the opportunity to attract new shareholders.
Today, Greg Hywood, Fairfax chief executive said the company was making “excellent progress” and had made “all necessary regulatory approvals” to meet the timetable for completion.
Post separation, Domain will incur a number of costs and adjustments not currently reflected in its segment financials, which are estimated to cost between $8m and $10m a year.
Based on preliminary estimates they consist 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
Fairfax Media also confirmed group revenues are around 6% below last year for FY17 H2, subject to final year end and audit processes.
Domain has reported an overall revenue increases of 10%, with its digital business up 22%.
Metro Media has a revenue loss of 12%, Australian Community Media is down 11%, New Zealand Media is down 4% and Macquarie Media’s revenue is down 5%.
The company estimates an earnings before interests, tax, depreciation and amortization (EBITDA) of between $262m and $266m for the year ending June 2017.
On Friday afternoon, Fairfax’s share price fell more than 8% from $1.20 to $1.10 on the ASX.
So Domain is not so attractive? Seems very curious that TPG dropped the idea cold after having such a close contact with the CEO. News reports suggest there are issues shareholders must be concerned about. Notably the accounting for real estate agent incentives and revenue linked to non-Domain product.
Won’t be fun trying to sell Investors on the Domain”float”.
User ID not verified.
Domain clearly is not what it’s cracked up to be. I”ll be asking a lot of questions about what these guys found and why they walked. I smell a rodent.
User ID not verified.