Home World Business Fairfax Media management in urgent talks over TPG approach

Fairfax Media management in urgent talks over TPG approach

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Senior management at Fairfax Media were on Sunday locked in urgent meetings after private equity outfit TPG Capital approached the company with an offer to buy its biggest assets.

TPG has offered to buy Fairfax’s online real estate business Domain and the company’s three big publishing mastheads – The Sydney Morning Herald, The Age and The Australian Financial Review.

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Chief executive Greg Hywood and other senior staff were meeting at the company’s Pyrmont headquarters on Sunday.

News of the move broke on Sunday and well-placed sources confirmed the move including the view that the publishing mastheads were seen as a key part of Domain’s distribution platform.

Domain plus the three mastheads would be worth about $2.5 billion according to an Australian Financial Review report.

A Fairfax Media spokesman declined to comment on Sunday.

The deal’s proposed structure would mean Fairfax’s New Zealand business, its regional and community newspapers, radio assets and 50 per cent share of online streaming network Stan would be left out of the deal.

TPG bought just under 5 per cent of Fairfax Media in March sparking speculation about its plans for the company.

Fairfax Media chief executive Greg Hywood arrives at the company's Sydney headquarters on Sunday. Fairfax Media chief executive Greg Hywood arrives at the company’s Sydney headquarters on Sunday. Photo: Michele Mossop

Fairfax Media announced in February that it was looking into spinning off Domain into a separate listed vehicle to address perceptions that its value was unrealised as part of the broader group.

Fairfax is in the middle of a controversial editorial cost-cutting program at its metropolitan mastheads as it seeks $30 million in savings. Editorial staff went on a week-long strike starting last Wednesday.

Fairfax chairman Nick Falloon was executive chairman of Network Ten for nine years until 2010. Fairfax chairman Nick Falloon was executive chairman of Network Ten for nine years until 2010. Photo: Peter Rae

On Friday, major international investment fund Blackrock revealed it had substantially lifted its stake in Fairfax Media. It lifted its holding from 33.7 million shares to 115 million shares giving it more than 5 per cent of the company.

A day earlier, Fairfax Media chief executive Greg Hywood told an investor conference that the Domain review was “well under way” following the appointment of Grant Samuel and was expected to be completed later this year.

Domain was enjoying price increases for listings and audience growth, he said.

“Over the past two years, total mobile visits were up 133 per cent, total app visits up 107 per cent and app downloads grew 60 per cent,” he said.

Mr Hywood told the same conference that the publishing business was facing structural challenges and that Fairfax had cut net publishing costs by $400 million over the past five years.

“Through this entire transition our publishing businesses have remained profitable,” he said.

The federal government over the weekend announced reform of the country’s tight media ownership laws prompting predictions that the sector would see a flurry of corporate activity.

In particular the government is looking to do away with the “two-out-three” rule, which prevents single ownership of TV, radio and newspapers in the same capital city market.

Following Thursday’s update Deutsche Bank analyst Entcho Raykovski predicted the company would produce after tax profits of $142 million this financial year compared to $143.2 million before Mr Hywood’s presentation.

That number would fall to $135.6 million next year before bouncing back to $142.1 million in the 2019 financial year.

Mr Raykovski has a 12 month price target on Fairfax of 90 cents. 

Fairfax’s shares were trading at $1.06 at the market close on Friday.

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