Private equity bidding war erupts over Fairfax
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