Rinehart and Singleton May Seek Fairfax Break Up

Hancock Prospecting Pty. Rinehart
Gina Rinehart, chairwoman of Hancock Prospecting Pty. Photographer: Ron D'Raine/Bloomberg

Billionaire Gina Rinehart and John Singleton may seek control of Australia’s Fairfax Media Ltd. to pursue asset sales after teaming up to boost their say at the newspaper publisher, analyst Mark McDonnell said.

Rinehart, who failed in a bid for a board seat this year, and Singleton own 15.14 percent of Fairfax and agreed to consult on key issues related to boosting “shareholder value,” according to a filing today. They joined forces after the publisher of the Australian Financial Review rejected a sale of assets to Singleton’s Macquarie Radio Network Ltd. last year.

Rinehart “may not require long-term retention of the radio stations at Fairfax, so it’s entirely possible a deal has been struck or is under discussion” between her and Singleton, McDonnell, a Sydney-based analyst at BBY Ltd., said in an e-mail yesterday. “Singleton’s remarks suggest that he is still more interested in the radio stations than anything else.”

Fairfax, Australia’s second-largest newspaper publisher, posted a A$2.7 billion ($2.8 billion) loss for the year ended June as it cut jobs, closed print sites and wrote down the value of its newspapers as readers and advertisers switch to the Internet. Rinehart, Asia’s richest woman, was rebuffed from her request to become a director after disagreeing with conditions set by the board, including signing its Charter of Editorial Independence.

“Both Gina and I believe that the lifeblood of Fairfax is the integrity and accuracy of its journalism,” Singleton said in a Dec. 28 statement. “This in no way would be compromised if Hancock Prospecting and Gutenberg Investments had a significant say in the future of Fairfax.”

Shares Surge

Fairfax shares surged 7.4 percent to 51 Australian cents at 2:10 p.m. close in Sydney, paring this year’s decline to 29 percent. The stock, which dropped to a record low of 35 cents in October, has lost almost 90 percent of its value since May 2007.

Singleton bought shares in Sydney-based Fairfax through Gutenberg Investments, which he formed with M.H. Carnegie & Co., a venture capital and buyout firm founded by investment banker Mark Carnegie, according to the Dec. 28 statement.

Antonia O’Neill, an external spokeswoman for Singleton and Carnegie at Map and Page, declined to comment on their plans for Fairfax. E-mails to Rinehart’s Hancock Prospecting weren’t returned.

Rinehart owns 352.5 million shares, or about 15 percent of Fairfax, while Gutenberg holds 3.55 million, according to today’s filing to the Australian Securities Exchange.

Fairfax also publishes the Sydney Morning Herald and operates radio stations in that city as well as Melbourne, Brisbane and Perth. The company this month sold its remaining stake in online auction site Trade Me Ltd. for A$616 million.

Radio Stations

Singleton’s Macquarie network operates the 2GB radio station in Sydney, the most popular commercial talk broadcaster in Australia’s largest city.

“Clearly a split might make sense,” said Simon Marais, managing director at Allan Gray Ltd., Fairfax’s biggest investor after Rinehart with an 11.4 percent stake, according to data compiled by Bloomberg. “There is phenomenal value in the company and we are keen for it to be realized,” Marais said by phone.

Fairfax this year took a A$2.8 billion writedown of items including newspaper mastheads, goodwill and customer relationships. The company said June 18 it would cut 22 percent of its workforce, close printing sites and introduce digital subscriptions to halt sliding sales and a stock price slump.

Sale Abandoned

Fairfax scrapped plans to sell its radio assets in October 2011 after failing to receive an acceptable proposal, it said.

“For the amount of money I was prepared to pay for the radio assets of Fairfax I could buy a significant amount of all the assets of Fairfax at a far lower price to earnings multiple,” Singleton said. “With my preferred direct route closed, I have decided to pursue another path.”

Fairfax Chief Executive Officer Greg Hywood has expressed his preference for a bid for the entire company rather than a split of assets, BBY’s McDonnell said.

If Singleton “acts in concert with Rinehart and others, he may well achieve a separation of the radio businesses via a change of control,” McDonnell said. “I’d expect the radio assets to be valued on a higher earnings multiple than the metro papers.”

New York-based News Corp., the media company controlled by Rupert Murdoch, is Australia’s largest newspaper publisher.

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