TPG, OTPP return with full buyout offer for Australia's Fairfax

They are offering A$1.20 per share for all outstanding shares on a fully diluted basis, according to a filing. This represents a 13% premium to the May 5 closing price, the last trading day before the consortium submitted its initial offer, which involved holding certain assets under private ownership and spinning off the rest into a new listing. Fairfax shares were up 7.2% at A$1.15 as of late morning on May 15.

The earlier offer, which valued the company at A$1.20-1.25 per share, would have seen TPG and OTTP take full control of Fairfax’s real estate listings business, all of the assets in its events and digital ventures business apart from excluding subscription video-on-demand unit Stan, and metropolitan newspaper titles The Sydney Morning Herald, The Age and The Australian Financial Review.

That would have left Fairfax’s regional, community and agricultural media titles, New Zealand publishing assets such as Stuff.co.nz, its radio station network, and Stan in the newly listed entity. This entity would also absorb all of Fairfax’s existing debt.

Fairfax presents a challenge to prospective buyers because of the contrasting fortunes of its digital and traditional media assets. The company reported revenue of A$1.81 billion for the 12 months ended June 2016, down slightly on the previous year, but swung from a net profit of A$87.2 million to a net loss of A$883.2 million largely due to A$1 billion in impairment costs tied to the Australian newspaper titles. Meanwhile, the real estate listings business and Stan are growing rapidly.

The Fairfax board has in recent months explored a number of different options for the business. These include a merger with New Zealand's NZME – which New Zealand regulators declined to authorize – and the spin-out of Domain into a separate listed company that would be up to 60% owned by Fairfax. It also plans to restructure the editorial operations of the metropolitan newspapers, a move that will result in job cuts.

TPG is currently in the market with its seventh pan-Asian fund, targeting up to $4.5 billion. Australian operations are led by Joel Thickins, who moved over from CHAMP Private Equity at the end of last year in place of Ben Gray, who has set up his own private equity firm. Recent TPG activity in the country includes the sale of Alinta Energy to Chow Tai Fook Enterprises for $3.1 billion.

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• Topics
• Australasia
• Buyouts
• Media
• Technology
• Australia
• TPG Capital
• OTPP