Home World Business Fairfax Media releases detail of TPG’s split proposal

Fairfax Media releases detail of TPG’s split proposal

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Fairfax Media has released the details of an approach from a TPG Group-led consortium that would see it split up its publishing business.

On Sunday Fairfax revealed TPG Group had made an unsolicited approach that would see property listings business Domain sold to TPG along with the metropolitan publishing assets (including the Sydney Morning Herald, The Age and the Australian Financial Review) to form a new company the consortium is calling “Domain Co”.

Fairfax Media chief executive Greg Hywood said the board is considering the bid. Fairfax Media chief executive Greg Hywood said the board is considering the bid. Photo: Louise Kennerley

TPG is offering 95 cents per share in cash to create get the assets to create Domain Co, which would not be listed, along with scrip in a new listed vehicle which would own Fairfax’s remaining assets including its New Zealand media titles and its 50 per cent stake in streaming video service Stan.

Faifax shares finished trading on Friday at $1.06.

Fairfax’s leadership held urgent meetings over the weekend to discuss the proposal.

In a statement to the ASX on Monday morning, the company said the bidding consortium valued the assets that would form a new listed entity at between 25 cents and 30 cents a share.

Fairfax said the bidding consortium includes the Ontario Teachers Pension Plan alongside TPG and there were a number of conditions on the proposal which was under consideration by the board.

The conditions include due diligence, shareholder approval and the nod from the Foreign Investment Review Board, the statement said.

“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. This proposed split may not optimise shareholder value,” it said.

The company told shareholders they did not need to take any action.

“Regardless of any potential proposal, the Fairfax board believes that Fairfax has a very attractive future and that the company is well positioned to continue to deliver shareholder value,” it said.

Key conditions and assumptions include::

  • Domain making a pre-tax profit of $115 million in line with broker consensus;
  • Australian Metro Media and Digital ventures make a combined pre-tax profit of $34 million again based on consensus;
  • That the consortium buys Domain Co free of both cash and debt; and
  • Unanimous support of the board.

Fairfax is in the middle of a contentious cost-cutting program which looks to strip $30 million in editorial expenses from the metro publishing business.

Those cuts have prompted a week-long strike by editorial staff which is due to conclude on Wednesday.

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