Fairfax gets its Domain in order on spin-off talk

Fairfax Media announced a restructure on Thursday that will establish its strongly performing real estate unit, Domain, as a separate entity within the media group and position it as a potential spin-off or sale down the track, analysts say.

Fairfax Media announced a restructure on Thursday that will establish its strongly performing real estate unit, Domain, as a separate entity within the media group and position it as a potential spin-off or sale down the track, analysts say.

The company will now comprise five business units with two of them, including Domain, focused on Fairfax's successful digital assets which will highlight their value, but also make a sale easier.

"Our next phase at Fairfax involves simplifying the organisational structure to better meet the business needs of the corporation and best capitalise on the opportunities that a predominantly digital future will present," Fairfax chief executive Greg Hywood told analysts on Thursday.

Fairfax's Australian publishing business, including mastheads The Sydney Morning Herald, The Age and The Australian Financial Review, as well as regional media, will be merged into a new unit called Australian Publishing Media.

It will be headed by the current boss of Fairfax's New Zealand business, Allen Williams.

The radio business and the media group's New Zealand operations remain as separate entities.

Mr Hywood acknowledged that splitting out Domain, and a new Digital Ventures division housing Stayz, RSVP, and other businesses, gives the company options down the track but said the main focus at this stage is transparency as to their market value.

The Domain split addresses previous calls by analysts, such as Commonwealth Bank's Alice Bennett, to separate the business which many believe is one of the company's best but most undervalued assets. She said on Thursday that the restructure has the effect of making Fairfax more attractive for investors who can more easily see exactly how each unit is performing, but also "if they wanted to sell them, it makes it very easy. It gives them that flexibility down the track."

Morningstar analyst Tim Montague-Jones agreed, saying it gave Fairfax the option of selling the businesses "if they need to".

Speaking of a potential sale or spin-off, Mr Hywood told Fairfax Media: "In the longer term it gives you a whole range of options, none of which have been determined, but it's clear it's pretty obvious what we could do if we chose to."

The restructure will include a review of the new business units that is expected to yield further cost cutting.

This is expected to focus on the "structurally stressed" print business with cuts expected to focus on support services but editorial cuts have not been ruled out.

"This structure enables us to go through the process of minimising duplication around the servicing of this business," Mr Hywood said.

More detail of the cost cutting, and the financial performance of Domain as a separate entity, is expected to be provided at an investor briefing in June.

Mr Montague-Jones said he is expecting more details on redundancies and cost-out targets, but made it clear that the future of the publishing business rests with whether it can successfully launch a subscription model later this year for its publications to monetise what he described as its "phenomenal" online audiences.

As part of the restructure, Fairfax Metro Media chief executive Jack Matthews is set to leave the company along with the current head of Fairfax's rural and regional publications, Allan Browne.

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