Pri­vate eq­uity bid­ding war erupts over Fair­fax

Financial Times USA - - COMPANIES - JAMIE SMYTH — SYD­NEY

Hell­man & Fried­man, a US pri­vate eq­uity group, has made a A$2.9bn bid for Fair­fax Me­dia, fir­ing the start­ing gun in a bid­ding war with ri­val TPG Group for con­trol of Aus­tralia’s old­est me­dia group. Fair­fax said yes­ter­day it would open its books to both par­ties, a sign that the board is con­sid­er­ing a sale that would see the pub­lisher of The Syd­ney Morn­ing Her­ald and Mel­bourne Age news­pa­pers pass into for­eign own­er­ship.

“We have care­fully con­sid­ered the in­dica­tive pro­pos­als and be­lieve it is in the best interests of share­hold­ers to grant both par­ties due dili­gence,” said Nick Fal­loon, Fair­fax chair­man.

Shares in Fair­fax surged by as much as 7 per cent to A$1.24 on the ASX, a sixyear high for the me­dia group, which has en­dured a wretched few years dur­ing which it has cut thou­sands of jobs.

Fair­fax said it had re­ceived an of­fer by H&F at a price be­tween A$1.225 and A$1.250 per share, slightly above an ear­lier A$1.20 per share of­fer made by a con­sor­tium led by TPG. The H&F bid val­ues Fair­fax at up to A$ 2.87bn ($2.13bn) while the TPG bid, which is backed by the On­tario Teach­ers’ Pen­sion Plan Board, is val­ued at A$2.76bn.

Mr Fal­loon said the board would continue to pur­sue its strat­egy to de­merge Do­main, the group’s valu­able real es­tate ad­ver­tis­ing unit, while the pri­vate eq­uity group car­ried out due dili­gence.

Deutsche Bank said in a note this week that TPG’s A$1.20 per share bid for Fair­fax im­plied a mul­ti­ple of 19 times earn­ings for Do­main Dig­i­tal, which is sim­i­lar to the trad­ing level of its main ri­val, REA Group, which is con­trolled by News Corp.

“Given that REA re­mains the clear leader in line with real es­tate clas­si­fieds, we view this of­fer as com­pelling for Fair­fax share­hold­ers,” said Entcho Raykovski, an­a­lyst at Deutsche.

Fair­fax’s stable of Aus­tralian and New Zealand news­pa­pers is strug­gling to cope with fall­ing cir­cu­la­tion and ad­ver­tis­ing rev­enues amid height­ened dig­i­tal com­pe­ti­tion. The group re­cently an­nounced 125 new job cuts at its main city news­pa­pers, prompt­ing journalists to go on strike for a week.

H&F is a San Fran­cisco-based pri­vate eq­uity firm, which has ex­pe­ri­ence in in­vest­ing in me­dia as­sets such as Axel Springer, Getty Images and Na­tional Ra­dio Partners. Brian Pow­ers, a former chair­man of Fair­fax, is chair­man emer­i­tus of H&F and is in­volved with the group’s bid.

H&F is a share­holder in Scout 24, a sim­i­lar real es­tate busi­ness to Do­main. This busi­ness is run by Greg El­lis — the former chief ex­ec­u­tive of REA Group, the main ri­val to Do­main in Aus­tralia.

Any deal agreed by Fair­fax’s board with ei­ther of the US pri­vate eq­uity bid­ders would re­quire ap­proval from Aus­tralia’s For­eign In­vest­ment Re­view Board and the coun­try’s trea­surer, Scott Mor­ri­son. TPG’s bid for Fair­fax has sparked po­lit­i­cal con­cerns, which were aired at a par­lia­men­tary com­mit­tee on the fu­ture of jour­nal­ism this week.

Sam Dast­yari, a La­bor party se­na­tor and chair of the com­mit­tee, said the gov­ern­ment should con­sider putting na­tional in­ter­est con­trols on TPG — in­clud­ing pro­tec­tion of en­ti­tle­ments for journalists and a guar­an­tee of jour­nal­is­tic in­de­pen­dence — as part of any deal to buy Fair­fax.

TPG ini­tially de­clined an in­vi­ta­tion from the com­mit­tee to give ev­i­dence, but yes­ter­day the pri­vate eq­uity group of­fered to at­tend a fu­ture hear­ing.

Fair­fax has en­dured a wretched few years dur­ing which it has cut thou­sands of jobs

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.