Sydney Morning Herald Owner Plans Property Listings Spinoff (1)

(Bloomberg) -- Sydney Morning Herald-publisher Fairfax Media Ltd. is considering hiving off its property-listings business, turning the group’s main earnings engine into a new Fairfax-controlled entity as media income shrinks.

Fairfax shares soared the most in three years after it said Domain Group could be listed in Australia by the end of 2017. Fairfax will retain between 60 percent and 70 percent of the new entity and shareholders will receive stock in Domain, it said in a statement Wednesday.

A separate listing for Domain would put a market value on Fairfax’s biggest profit generator for the first time, while still channeling most of its earnings back to the group. Domain is probably worth between A$2 billion ($1.5 billion) and A$3 billion, according to Credit Suisse Group AG, potentially dwarfing Fairfax’s entire current market value.

Shares in Fairfax jumped 10 percent to 96 cents at 10:04 a.m. in Sydney, on course for the steepest climb since February 2014. Fairfax’s market capitalization swelled to A$2.2 billion.

Earnings at Domain have soared after a five-year property boom in Sydney, while advertising declines eat into Fairfax’s publishing division that also produces The Age and the Australian Financial Review.

Splitting off Domain offers “a more flexible corporate structure to maximize shareholder value,” Fairfax Chief Executive Officer Greg Hywood said in the statement. “Fairfax would continue to benefit from the strong long-term growth profile of Domain.”

Fairfax also Wednesday reported a first-half profit of A$83.7 million, up from A$27.4 million in the same period a year earlier, as the company racked up fewer one-time charges. Sales at Domain rose 5.8 percent. Revenue at Fairfax’s city and regional publications fell 8.2 percent and 12 percent, respectively.

Domain accounted for 39 percent of Fairfax’s A$145.1 million of earnings before interest, tax, depreciation and amortization in the latest six-month period.

Since the end of the first-half period, revenue in January fell 10 percent from last year “in a slower than usual start across the media industry,” Fairfax said. February revenue was down around 6 percent, the company said.

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To contact the reporter on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net.

To contact the editors responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net, Edward Johnson, Peter Vercoe

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