Private equity firm TPG Capital is looking to make a move on the Australian Fairfax Media Ltd. The news of a possible bid broke out on Wednesday and the shares in Fairfax Media saw an immediate boost. However, TPG might not have set its eyes on the whole organisation and a possible sale might result in the breakup of the business.
Eyeing to buy
The possibility of a sale was first published by the Australian Financial Review on Wednesday. According to the newspaper, the US-based private equity firm had been quietly amassing shares in the organisation and it was now considering an official bid to take control. The newspaper is just one of the popular media outlets owned by Fairfax Media.
Last week, the Australian ran a column that claimed the private equity firm is lobbying other firms to consider a bid. According to the post, Platinum, Cerberus and Fortress were among those TPG is trying to excite snatching the publisher.
The media arm not the real target
TPG’s real interest might not be on the company as a whole, let alone its struggling publishing arm. The Sydney Morning Herald pointed out the possibility of a demerger after a possible sale. Fairfax Media is running a lucrative digital property business, which has long been an interest for investors. Domain has seen its revenues increase while the traditional print business has slowed.
Fairfax Media has reported it’s planning to spin off Domain. Analysts suggest the digital property business is worth over half of the value of Fairfax, which is currently estimated at AUS$2.5 billion.
It is unclear whether TPG is purely interested in Domain and if so, how it will go about making a deal with the company. The shareholder interest for a sale might prove problematic. According to the Sydney Morning Herald, one of Fairfax Media’s largest shareholders has said he would be “unwilling or reluctant to sell” for less than AUS$1.50 a share. The shareholder also noted the private equity firm might have missed an opportunity, as the share price stood at AUS$0.8 last November.
TPG could attempt to conquer print media and seek to cut the cost base for the organisation. However, this could only work as a short-term solution and inflict long-term damage on the traditional print format.
Will the deal happen?
According to the Australian Financial Review, the private equity firm is being advised by investment bank Credit Suisse and a local law firm Gilbert + Tobin. Furthermore, the article stated that Macqurie Capital and Herbert Smith Freehills are supporting Fairfax Media.
The media organisation has seen its stock price increase in recent weeks, with the most recent surge taking place after the news broke out. The strong performance is likely to push up the price and it remains to be seen whether the private equity firm is willing to take the plunge.
Due to Australian regulations, no single foreign investor is able to own more than 5% of an Australian media company without an official approval by the Foreign Investment Review Board.