Fairfax Media (FXJ) confirmed last night it has received an unsolicited approach from a consortium led by US private equity company TPG capital. The rest of the consortium wasn’t identified last night.
Fairfax CEO Greg Hywood wrote to staff on Sunday evening confirming the “preliminary indicative” proposal and pointing out it was still subject to a number of conditions including approval by the Foreign Investment Review Board (FIRB).
The company will make a statement containing Hywood’s comments to the ASX before trading this morning.
Hywood said TPG’s proposal would see it acquire the Domain property website, Australian Metro Media (including the Sydney Morning Herald, The Age and the Australian Financial Review) as well as the company’s events and digital ventures.
The deal’s proposed structure would mean shareholders would receive 95 cents cash a share for the assets TPG bought (a reported $2.2 billion) and shares for the company holding Fairfax’s New Zealand business, its regional and community newspapers, Macquarie Media radio assets and the 50% share of online streaming network Stan.
Mr Hywood held meetings with senior executives at the company’s Pyrmont headquarters on Sunday.
"Appropriately, the Fairfax board is reviewing the indicative proposal," he said.” There is no certainty that the indicative proposal will result in an offer for Fairfax, what the terms of any offer would be, or whether there will be a recommendation by the Fairfax board. There is also no certainty that the indicative proposal is capable of being implemented given the complexity involved in splitting the businesses.”
The news came a day after the Federal Government announced that it was prepared to weaken its media control laws, a move that is expected to help save the embattled Ten network and should see a sharp rise in the value of its share price when trading resumes on the ASX this morning.
Ten shares fell more than 4% on Friday to end at a new record low close of just 22 cents (2.2 cents before last year’s one for 10 consolidation).
News of the TPG approach should see the Fairfax share price rise this morning, but not by much because at Friday’s close of $1.06 (down 2.3%) the company was valued at $2.44 billion. The assets not wanted by TPG would not add very much to that valuation.
The latest move from TPG follows up reported interest in April when it was revealed TPG had bought an 4.7% stake in Fairfax.
Fairfax CEO, Greg Hywood last week told a Sydney investment conference that revenues from its metro and regional newspapers had dropped 11% since the start of the year, significant higher than a year ago. Domain has seen a 10% rise (which was also down on a year ago
Fairfax is in the middle of a controversial editorial cost-cutting program at its metropolitan mastheads as it seeks $30 million in savings by sacking 125 people from the newsrooms of the Age, SMH and a couple of websites.
Editorial staff from the metro metro papers went on a week-long strike starting last Wednesday in protest at the cost cutting, which is part of the move by Fairfax management to spin off part of its Domain website business later this year, with Fairfax retaining between 60% to 70%.
