Morgan Stanley is managing a sale of 117 million Fairfax shares through a book-build offer at 50 Australian cents each, according to a person familiar with the sale, who asked not to be identified as the matter is private. The stake is being sold by Rinehart, the Financial Review reported, without saying where it got the information.
Rinehart, whose Hancock Prospecting Pty. is Fairfax’s largest shareholder, has clashed with management over her request for board seats. The publisher of the Financial Review and Sydney Morning Herald wrote down the value of its newspaper titles by A$2.8 billion ($2.9 billion) as it reported a record loss of A$2.73 billion in the 12 months ended June 24 today.
John Klepec, chief development officer for Hancock Prospecting, and Mark Bickerton, a spokesman for the closely- held mining company, didn’t immediately respond to e-mails requesting comment.
Hancock owns 15 percent of Fairfax, according to data compiled by Bloomberg.
The publisher is cutting 22 percent of jobs, closing print sites, charging for online access and plans to convert its main broadsheets to tabloids as it battles slumping advertising and paid circulation. Today’s charge follows more than $3 billion of write-offs announced this year by rivals News Corp. (NWS) and APN News & Media Ltd (APN), and more than A$600 million of impairments Fairfax took last year.
“Unfortunately the 2013 outlook for Fairfax does not look much brighter,” Ben Le Brun, market analyst at OptionsXpress in Sydney, said in an e-mail. “The short term future revolves around Fairfax and other publishers’ online aspirations and how best to monetize their sites. There are still many uncertainties surrounding these plans.”
Hancock Prospecting said in a statement July 5 it had cut its stake in Fairfax from about 19 percent to resolve an issue around an insurance policy for Fairfax directors. While Hancock Prospecting is not seeking control of the publisher, it wants two seats on the board, it said in the statement.
Jack Cowin, who describes himself as a friend of Rinehart, was appointed as a director July 19.
Rinehart, with a $19.2 billion fortune according to the Bloomberg Billionaires Index, has been pushing the company to address a slumping share price, declining newspaper circulation and record losses.
Fairfax reported revenue fell 6 percent to A$2.3 billion from a year earlier and underlying earnings before interest, tax, depreciation and amortization dropped 17 percent to A$506 million.
Revenue in the first part of the 2013 financial year is tracking 10 percent below the same period 12 months earlier, Fairfax said today. Advertising spending on newspapers in July fell 30 percent from a year earlier, according to research group Standard Media Index.
“Frankly, I’ve never seen an advertising environment like this,” Chief Executive Officer Greg Hywood told reporters on a conference call today. “It is prudent to manage a company in this environment without hoping or wishing for an upturn.”
Circulation of the Sun-Herald, Fairfax’s best-selling newspaper, fell 19 percent from a year earlier in the three months through June, according to the Audit Bureau of Circulation, while editions of the Sydney Morning Herald and Melbourne’s Age were down more than 13 percent.
“Clearly our main markets are Melbourne and Sydney. There’s plenty of evidence that there’s virtually zero growth in these markets at the moment,” Hywood said. Management will assume that those conditions will continue rather than “base the company on wishful thinking,” he said.
Total impairments to Fairfax’s metropolitan division, including the Sydney Morning Herald, Age and Financial Review newspapers, came to A$948 million, while A$972 million was written off its regional newspaper network and A$619 million was cut from the value of New Zealand newspapers including the Dominion Post.
News Corp. (NWSA), the media company controlled by Rupert Murdoch, announced writedowns of $2.8 billion Aug. 9, saying they were principally related to its newspapers in Australia without giving more precise figures.
APN News & Media, in which Independent News & Media Plc. (INM) has a 30 percent stake, wrote A$485 million off the value of its New Zealand publications Aug. 17.
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