Fairfax Media shares didn’t react yesterday to the much tipped move by the company to explore the possible sale of its radio stations.
The shares traded unchanged at $1.04. They had earlier jumped to $1.075 on the news, then retreated as shareholders treated the news as old hat.
There have been enough hints and leaks in the media and brokers’ reports lately about a possible sale, that the Fairfax statement was read and put to one side.
The most logical buyer is Macquarie Radio, controlled by john Singleton, which owns 2GB in Sydney and the stuttering MTR in Melbourne.
But the question is whether Macquarie has the financial clout to pay what Fairfax would be asking, more than $200 million for stations that include the underperforming 2UE in Sydney, the better placed (and market leading) 3AW and 4BC in Brisbane, plus 6PR in Perth and the regions.
Macquarie already controls 2CH in Sydney, which plays old skewing music and is in fact a very cheap station to run.
Under broadcasting law, media groups can own two radio stations in the one market: for years for example, Austero owned 2MMM and 2Day in Sydney and had similar setups in other capital cities.
Fairfax has appointed appointed KPMG to assist in the process and said in yesterday’s short statement that any sale would be contingent on finding an acceptable price.
Proceeds from any sale would be used to repay debt and increase the company’s financial flexibility.
"The decision to consider the divestment of Fairfax Radio has been taken in response to strong expressions of interest from prospective acquirers and as part of our ongoing review of opportunities to maximise shareholder value and the mix of assets we own," Fairfax chief executive Greg Hywood said in the statement.
Fairfax said the sale process is expected to finish later in 2011. Fairfax’s main radio stations are 2UE in Sydney and 3AW in Melbourne.
The potential sale of radio stations comes as the company seeks to cut costs amid a 4.5% drop in advertising revenue for its traditional print operations in the current half.
Last week, Fairfax said it would outsource 82 sub-editor positions to Pagemasters as part of the overhaul.
“We are positioning Fairfax Media for long-term growth and continuing with the implementation of Fairfax Media’s Strategic Plan.
"We anticipate further progress in (financial year 2012) executing our strategy to transform the Metropolitan Media Business, improving the underlying operating performance of all of our businesses and reshaping the portfolio to lift the long-term growth rate," Mr Hywood said in the statement.
