Newspaper and internet group Fairfax last week confirmed the media sector’s worst kept secret as it unveiled a damp squib of a half year result: that it is considering a plan to carve out the company’s cash cow – the online property website Domain.com.au into a separate company.
Fairfax is looking at a structure similar to that of its bitter rival, Rupert Murdoch’s News Limited and its successful online real estate arm, market leader Realestate.com.au.
“Fairfax would continue to own a controlling majority of Domain – between 60 and 70 per cent – while issuing shares in Domain to Fairfax shareholders at the time the separation is implemented,” Fairfax CEO Greg Hywood told media on a results conference call on February. 21.
Like News, Fairfax needs to retain a decent stake in Domain to prop up its ailing newspaper business. News also has Foxtel as part of its global newspapers group, helping to improve its bottom line following its 2014 demerger from its US movie and TV business 21st Century Fox.
“Domain still delivered 15 per cent growth in digital revenue, supported by further depth penetration, yield increases and strong growth in media developers and commercial,” he explained.
“Total visits were up 13 per cent, with total mobile visits increasing an impressive 27 per cent and total app visits up 23 per cent.”
The question is, what happens next? There has been speculation in financial markets, the media industry and the press in recent months that Fairfax was the target of private equity companies.
The Australian’s up and coming Data Room column last week named Platinum, Oaktree, Fortress, Apollo and TPG Capital as possible candidates.
But, as Yoda so cryptically told Luke Skywalker in The Empire Strikes Back: ”There is another”. Unlike the diminutive Jedi master, we won’t make you wait.
InnovationAus.com understands that Chinese ecommerce giant turned multi-media and finance conglomerate Alibaba, is looking for media acquisition opportunities globally and that Australia is no exception.
Media, of course, doesn’t refer to just content companies but to the whole swathe of advertising, online and social media groups.
But it is also understood that both News and Fairfax are certainly on the radar of the Jack Ma founded, Hangzhou-based group.
Mr Ma was recently in Australia to officially open the company’s headquarters in Melbourne and its clear that the company wants to establish a beachhead for many of its division in Australia, with news that its China market leading payment platform will also be rolled out locally.
Alibaba has form in the media sector; as well as launching its own film division Alibaba Pictures in 2014, it purchased Hong Kong’s venerable English language daily newspaper South China Morning Post.
With octogenarian Mr Murdoch still very much alive and kicking (although not Tweeting since his marriage to one time supermodel Jerry Hall) – and out withstanding the fact that News once owned the SCMP – he has shown little inclination of getting out of newspapers, despite being tested by the News of the World phone-tapping scandal.
One imagines it would not be until his death that his heirs may or may not “do a James Packer” and sell out of the business that created the family fortune.
But would such a buy – from an Alibaba or associated company – be purely commercial or have other motives as well?
There are quite serious questions, of course, about whether the federal government, in the shape of the Foreign Investment Review Board, should allow such as deal.
China has a highly sophisticated, deep pocketed and long-term “soft power” reach that is global in its scope.
When Mr Ma bought the South China Morning Post, there was a widespread gnashing of the teeth in the former British colony.
The SCMP’s quality has been quietly deteriorating since Murdoch sold out to Ronald Kwok and since Mr Ma took over it’s been increasingly patchy.
It is still one of the key sources for news about the mainland, but there are days when its from page looks for all the world like the Communist Party-run English language propaganda sheet The China Daily.
But Mr Ma, like all wealthy Chinese ‘private’ business people, has deep Communist Party connections and his purchase has been widely seen as a favor to Beijing, a theory bolstered by a phalanx of long-time, well-regarded critics of the mainland regime leaving the paper.
Any sign that Mr Ma was making a play for Fairfax would cause problems in Canberra with anti-Chinese feeling bubbling away, on the increasingly vocal right wing of the parliament.
But should any white knight of a major Australian media business that is staring some sort of defeat in the face – as evidenced by its prospective de-merger – be knocked back or should a possibly flawed suitor be welcomed for the sake of maintaining some sort of media diversity?
That would be a conundrum that would provide plenty of fodder for the very papers that Fairfax (still) prints.