Fairfax Media has is in talks with a private equity consortium over its unsolicited offered to buy some, but not all, of the troubled media company.
In a letter to staff, Fairfax Media chief executive Greg Hywood said the unsolicited proposal led by private equity firm US TPG and Canada’s Ontario Teachers’ Pension Plan Board was indicative and if accepted would require approval from the Foreign Investment Review Board.
“Appropriately, the Fairfax board is reviewing the indicative proposal, ” Mr Hywood said.
The TPG bid, if accepted, would require a complex breakup of the Fairfax media empire.
Mr Hywood said TPG’s proposal was to acquire the lucrative Domain real estate business and Australian Metro Media, which includes the mastheads of The Sydney Morning Herald, The Age and The Australian Financial Review.
The Domain business is regarded as the jewel in the Fairfax crown — a far cry from the days when revenue from classified advertising in newspapers were described as “rivers of gold”.
Fairfax Media’s board gave no indication of whether it will make a recommendation on the $2.2 billion proposal, but has warned that it may not be good value for shareholders.
Investors seemed to be interested in the TPG proposal, however, driving Fairfax shares up by 3.0 cents, or 2.83 per cent, and closed at $1.085 at 4pm AEST on Monday, their highest level since March 29.
Under the proposal, Fairfax shareholders would retain current assets in New Zealand, the regional newspapers business, its stake in the Macquarie Radio Network and a 50 per cent share in the Stan streaming venture.
The proposal would also see Fairfax shareholders retain “existing Fairfax net indebtedness”.
The Fairfax board released a statement saying it was wary about the possible outcomes of a demerger.
“The Fairfax board notes that there is no certainty that the indicative proposal is capable of being implemented given the complexity involved in splitting the businesses,” the board said in a statement.
“This proposed split of businesses may not optimise shareholder value.”
The proposal comes as Fairfax Media prepares to sack as many as 125 full-time equivalent positions from its metropolitan newsrooms as part of the latest cost-cutting measures.
Fairfax management and exempt union staff are producing the newspapers after staff went on strike as a result of the cuts.
Indicative proposal ‘may not’ result in an offer
However, Mr Hywood said the TPG proposal was preliminary and that no decisions has been made.
“There is no certainty that the indicative proposal will result in an offer for Fairfax,” Mr Hywood wrote in a letter to staff.
“There is also no certainty that the indicative proposal is capable of being implemented given the complexity involved in splitting the businesses.”
Fairfax Media is expected to provide an update to the stock exchange on Monday.
– with AAP, ABC