Fairfax confirms and questions complexity of unsolicited $A2.2b break-up bid

Australasian news publisher Fairfax Media this morning confirmed to investors that a "non-binding indicative proposal" from US-based private equity firm TPG to buy its three most powerful Australian newspaper titles and the company's real estate website, Domain, but questioned whether the deal could be done.

"The Fairfax board notes there is no certainty that the indicative proposal is capable of being implemented, given the complexity involved in splitting the businesses," a company statement to the Australian Securities Exchange says. "The proposed split may not optimise shareholder value."

Pitched at 95 Australian cents per share, the bid values the assets sought at around $A2.19 billion.

The proposal would leave Fairfax's New Zealand news assets, which include the Stuff website and numerous newspaper titles including The Dominion Post, Christchurch's The Press, the Waikato Times, and Taranaki Daily News, and a range of Australian radio stations in what The Australian newspaper today described as "a sorry grab-bag of rump assets".

"Fairfax will be reduced to a regional publishing unit, a 54 percent stake in Macquarie radio network, a half share of the new streaming service Stan, plus a rump New Zealand business that it has tried to offload by merging with its rival," wrote media columnist Mark Day.

The New Zealand Commerce Commission last week declined the proposed merger between Fairfax NZ and NZME, the NZX-listed publisher of the New Zealand Herald and a string of regional newspapers and associated websites, saying the tie-up would create too dominant a single news producing group that would risk a loss of 'plurality' of opinions and coverage necessary to a healthy democracy.

The New Zealand publishers have yet to indicate whether they will seek a judicial review of the decision, which they have previously argued has ranged beyond the scope of the Commerce Act by allowing unquantifiable, non-commercial factors to outweigh commercial benefits from the merger that the commission accepted would be worth between $40 million and $200 million over five years.

The TPG indicative offer coincides with announcements by the Australian federal government of the intention to loosen media ownership laws that currently prevent any news outlet from owning all three of print, television and radio assets - a move the Sydney Morning Herald reports places "Australia's embattled media industry ... on the verge of the biggest ownership shake-up in a generation".

Based in Forth Worth, Texas, and San Francisco, TPG's website boasts it is positioned "alongside innovative and disruptive companies that are transforming the world's economy, which gives us a unique view into the rapidly changing internet and digital media space". It has invested in internet plays including ride-sharing and accommodation services Uber and Airbnb, and the self-service online questionnaire service SurveyMonkey.

Today's Fairfax statement confirms the offer is for the Domain real estate website, which is considered Fairfax's prime performing asset, and the main advertising channel for Domain, the company's three best-known mastheads: the Sydney Morning Herald, The Age in Melbourne, and the Australian Financial Review, along with Fairfax's events and digital businesses, excluding Stan.

The bid also comes amid a week-long strike by journalists at all three titles following an announcement by Fairfax chief executive Greg Hywood that the group is seeking A$30 million of cost savings through a new round of lay-offs.

(BusinessDesk)