TPG now bids for entire Fairfax empire

A consortium including private equity firm TPG and the Ontario Teachers Pension Plan ups its bid for the Fairfax empire, offering $2.7bn.
 

The group’s offer of 95c per share for the major mastheads, and online property business Domain was rejected, and now it offers $1.20 a share for the whole business, which includes its regional newspaper publishing branch, and joint venture Stan.

The offer has pushed shares up to a six-year high, but Fairfax’s second largest shareholder, Martin Currie Australia urges against the deal, saying it undervalues the company.

Reece Birtles, chief investment officer, Martin Currie Australia says, "We believe the bid materially undervalues the prospects for Fairfax given the growth in Domain, the digital transformation of mastheads and the strategic value with changed media laws.

"Private equity only go into these acquisitions believing they can earn 15 per cent [returns]. We also believe Fairfax can provide those returns to shareholders, hence the board should reject the bid and restate their confidence in the future prospects of Fairfax as a standalone business."

Alex Waislitz, the head of Thorney Opportunities, which owns about 2.4 per cent of shares, says, "While the revised offer is clearly superior in that it is an offer for the entire company, TPG may need to offer more than $1.20 if it is to win the support of all shareholders".

The strategic value of Fairfax in the context of changing media ownership laws is significant. The Turnbull Government wishes to remove the two out of three law, which prevents companies and individuals from owning radio, newspaper, and television assets in the same capital city, and the 75 per cent law, which prevents broadcasters from reaching more than 75 per cent of the population. With these abolished, the door opens to mega-mergers to further consolidate the already small media industry in Australia.

A spokesman for TPG, which currently owns just less than 5 per cent of Fairfax, said the offer of $1.20 a share was a 41 per cent premium to Fairfax's share price before news broke that it was interested in bidding for the company, and nearly 30 per cent higher than the stock after management said it was looking into a spin-off of Domain.

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