Greg Hywood performs surgery on Fairfax Media’s balance sheet
In November Fairfax Media sold its specialist agricultural media business in the US for $76m.
Yesterday, Fairfax Media sold out of their 51% stake in the New Zealand based on-line and classifieds site Trade Me for $616m.
In a matter of weeks the Company has raised $690m.
This compares with their net indebtedness of $1.49 billion and 30 June 2011 and $914m at 30 June 2012.
Capitalised at $1.25 billion (2,352m shares on issue X a $0.53 share price), we suspect a number of “value investors” will jump on board as Fairfax Media becomes less financially leveraged.
Montgomery believes Fairfax lost its identifiable competitive advantage to several internet offerings many years ago and we will not be tempted. Having said that, we also believe that a digital transformation is under way and the right people for the job are being mobilised.
As you know we aren’t speculators and our process requires us to see evidence of the turnaround occurring. A demonstrated track record is required if we are going to invest rather than speculate. And as we have pointed out recently the shares are as close to an estimate of intrinsic value as they have ever been in the last decade.