The separation of Domain from Fairfax Media will add to Corporate Australia’s mostly good record on demergers. The online property-services group has more upside than nearest rival REA Group and higher risk. There’s a case to include Domain and REA in portfolios.
Switzer Report readers know of my interest in demergers done for the right reasons. I wrote about the merits of “spin-offs” for this report in February 2016, nominating Sydney Airport, DuluxGroup and Asia Pacific Data Group as three to own.
To recap, I noted demergers are usually a better bet than Initial Public Offerings (IPOs). More is known about the demerged entity compared to an IPO, where the vendor has a significant information advantage over buyers.