Fairfax casts digital net after 'Trade' sale
FAIRFAX Media confirmed on Friday that it has completed the sale of its stake in New Zealand online auction house Trade Me for $616 million, and dipped straight back into the sector with the acquisition of tech investment firm Netus for an undisclosed sum.
Fairfax, which owns The Age and The Sydney Morning Herald, paid $NZ700 million for the entire Trade Me business in 2006.
Fairfax Media chief executive Greg Hywood said on Tuesday that the sale's proceeds would "provide us with a very strong balance sheet and the financial flexibility to invest and complete the company's structural transformation".
The sale cuts Fairfax's net debt to below $200 million.
Although the Trade Me sale was supported by some of Fairfax's big institutional shareholders, it deprives the company of a key source of digital earnings. The Netus acquisition - which is believed to be in the tens of millions of dollars - is designed to tackle this lack.
Netus founder Daniel Petre said the company would be charged with finding "investments that can benefit from the traffic Fairfax can point at new businesses".
He said Netus would be looking for opportunities that "have the potential to move the dial in a reasonably short period" - which he identified as three years.
Earlier this week Mr Hywood said the company was looking for small-scale digital acquisitions.
Netus will also focus on helping Fairfax's digital business achieve better results.
"We think there is some scope here as well," Mr Petre said.
Netus claims success with previous investments such as ReachLocal and Travel.com, with an average internal rate of return from its investment portfolio of 50 per cent.
Netus owns a 27 per cent stake in online video ads business The Video Network and 85 per cent of digital publisher Allure Media. Fairfax said on Friday that it had acquired the other 15 per cent of Allure.
Mr Petre and Netus chief Alison Deans both worked with the Kerry Packer-backed tech investment firm ecorp and helped develop eBay's local operations, which Ms Deans headed.
Mr Petre set up Netus in 2005 with a $40 million investment from Fairfax rival the Rupert Murdoch-owned News Ltd.
News sold its half-share in Netus in May for $22.3 million, saying it wanted to focus its resources on "larger opportunities than those within the scope of Netus".
This year Fairfax announced plans to cut more than 1900 staff and take about $235 million in structural costs out of the business. This includes plans to close its largest print plants in Sydney and Melbourne, turning the SMH and The Age into compacts, and to charge digital subscribers for access to these mastheads.
At that time, Fairfax chairman Roger Corbett said a breakup, or demerger, of the core media business was ruled out after detailed analysis as it would not add to shareholder value, and would undermine future value creation.