Double blow to Fairfax shares
FAIRFAX Media shares have plummeted after takeover talks with its two cashed-up private equity suitors collapsed over the weekend.
Its shares lost 10.91 per cent yesterday to hit a four-month low of 98¢, wiping off about $270 million in market value from the embattled publisher.
The company said in an announcement to the Australian Securities Exchange yesterday that it was now proceeding with its plans to spin off the Domain property classifieds business by the end of the year.
Domain has been tipped to fetch a price of up to $2 billion – almost the same value as Fairfax’s shares which were worth about $2.25 billion yesterday.
Fairfax’s ASX announcement also said that it expects earnings of between $262 million and $266 million for the financial year just completed, with overall group revenue down 6 per cent in the second half of the financial year.
Four weeks after opening its books to suitors Hellman & Friedman and the consortium led by TPG Group, the two bidders decided to withhold from making an offer.
TPG initially lobbed an unsolicited, non-binding bid of 95¢ per share for most of the Fairfax business on May 8, before upping it to $1.20 a week later for the entire company.
Competitor Hellman & Friedman quickly placed a rival bid of between $1.225 and $1.25 a share, valuing Fairfax at up to $2.87 billion.
But yesterday Fairfax chairman Nick Falloon said the company did not receive a binding offer for the business from either firm, signalling the end of their discussions with both parties.
“We received a letter from HG & F saying they couldn’t reach their bid on Friday, and we engaged in some conversations with TPG through Saturday and Sunday morning to explore whether there was a way of putting a bid forward,” Mr Falloon said.
“But it appears that the complication of our business was such that they didn’t want to bid for the whole business. That was the reading that we took out of that.”
Fairfax chief executive Greg Hywood said the company was now pushing ahead with its previously announced plan to spin off property business Domain by the end of 2017.
“We are making excellent progress with our preparations and have progressed all the necessary regulatory approvals to meet our timetable for completion by the end of 2017,” he said. Fairfax said in the trading update yesterday that Domain was the only business which posted an increase in revenue for the second half of the justcompleted financial year.
Domain’s overall revenue was up 10 per cent with its total digital business “up 22 per cent and accelerating”.