Second US bidder for Fairfax emerges as board decides to cooperate with sale process

The likelihood of Fairfax Media ending up in the hands of US private equity companies has significantly increased after the company revealed that a second bidder for the company has thrown its hat in the ring.

And in a sign that the board of Fairfax is now taking a sale process seriously, it has agreed to allow both new bidder Hellman & Friedman and the consortium led by TPG Capital enter a due diligence process.

The process will allow both companies full access to Fairfax’s books, including the company’s performance during this financial year. If they are satisfied with what they see, they would then make a binding offer.

So far both companies have made indicative offers that they would be willing to pay up to $1.25 per share for the company, valuing it at around $2.8bn.

Fairfax’s most valuable property is its real estate offering Domain, while it also owns flagship titles the Sydney Morning Herald, The Age and the AFR. The company also has stakes in streaming service Stan and radio network Macquarie Media, plus regional newspapers in Australian and New Zealand.

According to this morning’s update to the ASX, Hellman & Friedman joined the race last night. The announcement said: “The Fairfax Board has considered the Indicative Proposals and determined they will invite both Hellman & Friedman and the TPG Consortium to conduct due diligence in order to establish whether an acceptable binding transaction can be agreed.”

Both bids represent a slight premium on the company’s current share price, which was $1.16 before the ASX opened today. Since speculation about a bid began, the company’s share price has risen from around $1.

The statement from Fairfax said that the company is also pushing on with its plan to spin off Domain and float it separately on the ASX, in case a deal with the potential buyers does not get done.

Fairfax chairman Nick Falloon said in the announcement: “We have carefully considered the indicative proposals and believe it is in the best interests of shareholders to grant both parties due diligence to explore whether a potential whole of company proposal is available.”

Barriers to any deal would include the overseas funds needing approval by the Foreign Investment Review Board.

TPG first entered the fray in March with speculation that it would make a bid, but pulled back after the share price rose. The consortium finally showed its hand 11 days ago with an initial, complicated bid which would have seen it cherry pick Domain, the AFR, SMH and The Age but leave other parts of Fairfax behind behind.

Then over the weekend, TPG put forward a simplified bid to buy the whole company.

According to the ASX announcement, TPG has previously invested in companies including Uber, Airbnb, and PropertyGuru and currently manages more than $74bn of assets.

Hellman & Friedman’s investments have included Axel Springer, Digitas, DoubleClick and Getty Images. It manages more than $35bn in assets.

The typical pattern of behaviour when a private equity company buys an established company is to sell off assets and move to dramatically cut costs, before aiming to exit four to seven years later.


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