UBS AG is underwriting the sale of the 202 million shares, representing 51 percent of the company, at A$3.05 each, Sydney- based Fairfax said in a statement today. The price is 5.3 percent less than Trade Me’s closing price of A$3.22 on Dec. 14.
Fairfax is trying to turn around its newspaper business amid what Chief Executive Officer Greg Hywood said is a “structural decline” in the country’s print media. The company wrote down the value of its papers by A$2.8 billion in August and is firing 1,800 workers, closing print sites, charging for online access and converting its main broadsheets to tabloids to reverse two years of losses.
“This gives them a bit of headroom to see through the restructuring challenges they face in their metropolitan media business,” Peter Stamoulis, an analyst at Evans & Partners Pty in Melbourne, said by phone, referring to Fairfax’s print division. “The underlying business still has strong cash flows.”
Proceeds of the sale will be used to cut debt and allow the publisher of the Sydney Morning Herald and Australian Financial Review to support its restructuring plans, Hywood said in the statement. Net debt stood at A$849 million at the company’s year-end on June 24, down about 65 percent since 2008.
Fairfax rose 1 percent to 51.5 Australian cents at the close of trading in Sydney. The stock has fallen 88 percent in the past five years as newspaper readers switched to the Internet and falling consumer spending eroded advertising sales. Trade Me shares were halted today for the transaction.
Trade Me, New Zealand’s most popular online auction site, was bought by Fairfax for NZ$750 million ($633 million) in 2006. The Australian company previously sold 49 percent of the business in two tranches in November 2011 and June 2012, raising a net A$422 million from the sales.
Gina Rinehart, Asia’s richest woman, is Fairfax’s biggest shareholder, owning a 15 percent stake, according to data compiled by Bloomberg. She failed in June to get a seat on the board for herself after disagreeing on conditions including signing Fairfax’s Charter of Editorial Independence.
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