The ‘cat’ and his $100m coup

THE ‘cat’ has clearly scored a coup with his $125 million going on perhaps

$100 million purchase of a unique media gateway to the one-in-three Australians who do NOT live in the big capital cities.

The ‘cat’ is Antony Catalano who was the key driver in building the now $1.6 billion Domain real estate advertising business for Fairfax Media and which has now of course passed to Nine along with the other minor Fairfax assets.

The coup is his purchase of the sprawling portfolio from Nine of the 170 formerly Fairfax-owned (and neglected) mediumcity (Canberra and Newcastle and Albury-size), small-city (Bendigo and Ballarat-size), and down into the spectrum of town-size papers plus specialist rural titles like The Land.

The headline price is $115 million cash plus

$10 million of advertising ‘contra’. But after working capital adjustments the ‘real’ cost will clearly be closer to $100 million or even a little less.

It helped that Catalano (and his partner, Pratt family clan member Alex Waislitz) faced no serious buyer competition and Nine was of course a very ‘serious’ seller.

The deal is not without risk. Catalano is buying a 20th century business – he’s basically got to first bring it into the 21st century while also trying to build a growth future for it.

But his absolute risk fallback is the $60 million property portfolio, headlined by the business’s property in Canberra.

In effect he’s paying $40 million for a business that generated $21 million of EBITDA in the December half in the middle of a drought and not a lot of love from a Fairfax head-office embarked on selling itself to Nine.

That profit was down 42 per cent on the 2017 December half. In the 201718 full-year the business posted a $57 million EBITDA on a $400 million revenue base.

Now, like all old-tech 20th century media, those numbers were heading relentlessly south. That’s why you get to pay what Catalano paid and with noone prepared to pay more.

Further, arguably the challenges are far more acute when spread over so many properties with smaller populations than the similarly challenged capital city print and free-to-air TV media.

But a $400 million revenue starting base is a pretty big number to start with – indeed, it was only $90 million less than the 2018 revenue of Fairfax’s Melbourne-Sydney papers.

Most critically, in aggregate it gives Catalano at least opening access to 7-8 million Australians – who are all, at least so far as these properties are concerned, also ‘digital virgins’.

They haven’t been offered – or required to pay – for digital subscriptions. They haven’t been targeted for the digital classified advertising, which was the building of, arguably the saving of, Domain and thus Fairfax.

There’s a lot of obvious ‘small stuff’ that Catalano can do relatively quickly to slow the decline.

But the real challenge, the real opportunity, is to build the business into the media gateway to these Australians – helped by the way regional TV has been retreating from direct contact with those audiences.

It’s obviously a big ask, but the business now has exactly the sort of person – possibly even the only person – who could make it work. An entrepreneur with a lot of chutzpah.