Fairfax metro mastheads merger plan with Nine Entertainment

Fairfax’s Greg Hywood. Picture: Aaron Francis.

Fairfax Media is proposing to merge its metropolitan mastheads with free-to-air broadcaster Nine Entertainment while selling off as much as 40 per cent of its real estate listing arm the Domain Group as part of a radical carve-up of the publishing group.

A joint ownership plan is being considered by Nine and Fairfax, it can be revealed, where The Age, The Sydney Morning Herald and The Australian Financial Review are brought together with Nine’s broadcasting and website media operations in an effort to lift earnings and drive down costs for both parties through synergies. The Fairfax digital and events divisions would also most likely be brought into the structure.

Shares in Fairfax were placed in a trading halt following reports by The Australian’s DataRoom column that a demerger of property listings business Domain, where Fairfax would retain between 60 per cent and 70 per cent of the business, was planned to happen by the end of the year.

Under the shake-up, Fairfax would retain the publisher’s regional and community newspaper mastheads, which probably would be sold off to a private equity buyer, leaving Fairfax as a holding company with stakes in a raft of entities, including the listed Macquarie Radio Network, of which it owns 54.5 per cent, streaming company Stan and ­Domain Group.

Fairfax is likely to reveal further details of its restructure as it hands down its half-year results today. The move is aimed at ­unlocking value of the online-­focused Domain Group, which is being marked down due to its exposure to Fairfax’s metro publishing business.

Market analysts said yesterday that Fairfax has been a breakup play for a prolonged ­period of time and appeared to be pursuing a similar route to APN News & Media.

APN spun off its outdoor advertising operation into a separate entity and later its New Zealand newspaper business, which had been rebranded NZME, and sold its Australian regional newspapers to News Corp, publisher of The Australian, retaining the Australian Radio Network and digital and outdoor advertising media assets, including Adshel.

The move for Fairfax comes after it sold down 49 per cent of its online New Zealand website Trade Me before selling out of the company completely in 2012.

While Fairfax is working with Macquarie Capital on its spin-off plans, Nine is thought to have engaged with its long-time adviser UBS.

One of the main points of focus for dealmakers will be whether Nine would pay any money for the metropolitan mastheads and where the ­printing infrastructure and costs lie. While many question how Fairfax could convince Nine shareholders into taking on print assets, after the company divested ACP magazines around 2012, sources say Fairfax may likely leverage off the positive experience the pair had with video on demand service Stan.

While Fairfax has denied that chief executive Greg Hywood and events division boss Andrew McEvoy were both leaving, sources say a departure following a restructure of the business was likely, given that Mr Hywood would have a limited role in the new entity.

Mr McEvoy, who is said to be close to Mr Hywood, would also probably depart within the short to medium term, given the former Tourism Australia boss may also have a diminished role.

It is unclear whether the plans would secure the blessing of Nine and Fairfax shareholders if the plans proceed. Sources say chairman Nick Falloon would need to meet shareholders to gauge their views on a potential restructure.

It is thought the Fairfax board had also thrown open the door to suitors potentially interested in making a complete bid for Fairfax. Private equity firms are believed to have been courted to buy the company’s regional and community publications but it is believed that there have been no takers so far.