* Fairfax would keep 60-70 pct of Domain - source
* Analysts value Domain at about $1.5 bln
* No plans for capital raising alongside split - source
(Recasts, adds details of demerger plan, shareholder comment)
By Jamie Freed
SYDNEY, Feb 21 Australian newspaper and radio
group Fairfax Media Ltd is considering a partial
demerger of its real estate advertising arm Domain Group to
ensure its value is fully recognised by the market, said a
source familiar with the situation.
While unlocking value for shareholders, a demerger would
make Fairfax more reliant on newspapers in structural decline,
as advertising migrates online and foreign rivals like The New
York Times boost their online presence in Australia.
Domain is the company's highest-earning division and is
valued by analysts at about A$2 billion ($1.54 billion),
equivalent to Fairfax's entire market value based on its last
"Domain is an extremely powerful business and brand. It has
been the main driver of Fairfax Media's profitability for some
time," Alex Waislitz, an investor with shares in Fairfax Media,
said in a statement.
"It makes complete sense to list Domain separately and allow
the market to assign a proper value to both Domain and the
group's remaining media assets which it appears will stay in
Fairfax, the owner of The Sydney Morning Herald and The
Australian Financial Review newspapers, on Tuesday entered a
trading halt pending an announcement related to Domain.
The company was considering a plan to make Domain a separate
listed vehicle, with Fairfax retaining a 60 percent to 70
percent stake and distributing the remaining shares directly to
its current investors, a source familiar with the matter said.
The plan to list Domain later this year did not involve a
capital raising, said the source, who was not authorised to
speak publicly about the matter.
Fairfax is due to release its half-year results on
With property prices soaring to record highs in Sydney and
Melbourne, Domain's earnings before interest, tax, depreciation
and amortisation (EBITDA) leapt 40 percent to A$120 million in
the 12 months ended June 30.
Fairfax's EBITDA fell 2 percent last financial year with a
45 percent decline in its metro media division, reflecting the
deep-seated troubles at its main newspapers.
Domain is a similar business to larger listed rival REA
Group Ltd, which is controlled by News Corp.
REA Group, which has a market value of A$7.3 billion, on
Feb. 10 reported a 13 percent rise in first-half EBITDA to
($1 = 1.3016 Australian dollars)
(Reporting by Jamie Freed; Editing by Stephen Coates)