Hellman & Friedman submits $2.1b offer for Australia's Fairfax

The US private equity firm is willing to pay between A$1.225 and $1.25 per share, according to a statement – a premium to an existing offer of A$1.20 per share from TPG Capital and Ontario Teachers’ Pension Plan (OTTP), and to the May 17 closing price of A$1.16. Both offers assume that no dividends will be paid by Fairfax before the purchase is completed.

The company has invited the bidders to conduct due diligence and emphasized that there is no certainty as to whether either offer will be accepted. Both offers are subject to shareholder and regulatory approval.

Any buyer will need to grapple with the disconnect between the performance of Fairfax's digital and traditional media assets. The former include real estate listings business Domain Group and subscription video-on-demand unit Stan, both of which reported strong growth in the most recent annual report.

By contrast, the Australian and New Zealand newspaper portfolios, which include The Age, the Sydney Morning Herald and the Australian Financial Review, reported significant drops in EBITDA and A$1 billion in impairment costs, contributing to a net loss of A$883 million for the year ended June 2016, from a net profit of A$87 million the year before. The decline in profit came as revenue dropped from A$1.87 billion to A$1.83 billion.

Fairfax has explored several options for the business, including a merger with New Zealand media and entertainment business NZME that was blocked by New Zealand regulators. It is also currently pursuing the spin-out of Domain into a separate listed company that would be up to 60% owned by Fairfax. Fairfax will continue to develop this option while the GPs conduct due diligence.

Before their bid for the entire company, TPG and OTPP had made a separate offer that would see them assume control of Domain, the Australian metropolitan newspaper titles, and the events and digital ventures business apart from Stan. Fairfax's regional, community and agricultural media titles, its radio station network, its New Zealand publishing assets, and Stan would have been spun off into a newly listed entity.

San Francisco-based Hellman & Friedman has a connection to Fairfax through senior advisor Brian Powers, who was chairman of the company from 1998-2002. The GP’s involvement in Australian media reportedly includes an abortive privatization bid for Ten Network in 2010 alongside Nick Falloon, then executive chairman of Ten and now chairman of Fairfax.

Hellman & Friedman has made several investments in global media in the past, including the 2008 purchase of photo service Getty Images, which it exited in 2012. It also owned Axel Springer, the publisher of German newspapers Die Welt and Bild, from 2003-2010.

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• Topics
• Australasia
• Media
• Technology
• Buyouts
• Australia
• TPG Capital
• OTPP
• TMT
• Hellman & Friedman