TPG Capital – perhaps best known in Australia for its role in the controversial buyout of retailer Myer and its failed tilt at airline Qantas – has dipped its toes into digital media and real estate businesses before.
So what can we learn from that?
Fairfax Media chief executive Greg Hywood. Photo: Chris Hopkins
Since TPG, considered among the elite tier of global private equity firms, seems to be interested in Fairfax Media mainly for Domain, the best place to start is probably online real estate.
In 2015, TPG acquired through a consortium a controlling stake in PropertyGuru.com, which claims to be the leading real estate listing site in Singapore, with 16.1 million monthly buyers, and operations throughout South East Asia.
And in 2011, TPG acquired PRIMEDIA, now known as RentPath, which claims to be the leading digital real estate rentals platform in the US. Formerly the dominant player in print, it now generates all of its earnings from digital platforms.
So far so good. But when it comes to traditional media businesses the picture gets a little bit cloudier.
Perhaps most famously, TPG was part of a consortium that acquired Univision, the biggest Spanish language broadcaster in the US for $13.7 billion in 2007. The deal was a ” a symbol of the excesses of the credit bubble”, the Financial Times wrote, and “a period the private equity sector would prefer to forget”.
It was a top of the market price, the eighth-biggest leveraged buyout in history, according to the Wall Street Journal, and just before the onset of the global financial crisis wrought havoc on asset valuations.
TPG has a controlling interest in Singapore property listing site PropertyGuru.com.
Interestingly, Ontario Teachers Pension Plan, which has teamed up with TPG in the bid for Fairfax, is also part of the consortium than owns Univision.
It has been a mixed picture for Univision, which owns 17 broadcast, cable and digital networks as well as 126 local TV and radio stations, since the buyout.
TPG has a 40 per cent stake in satirical website The Onion.
As is the case with pretty much all private equity deals, Univision was saddled with a massive debt load by its new owners – about $US10 billion – making it one of the most heavily leveraged firms in the debt laden private equity landscape.
Univision struggled under this debt burden. In 2008, its debt was downgraded by Moody’s, and there was speculation legendary media mogul and Murdoch rival John Malone would make a play for its assets.
The company was ultimately able to refinance and by 2015, looked poised for an IPO. But those plans were pulled amid shaky markets. When it chooses to return to the public markets remains to be seen.
More encouragingly, the digital media assets TPG has been involved in acquiring have had the ability to invest for growth.
Univision expanded into digital publishing media with the splashy launch of Fusion, a site (and cable challen) focused on millennials. Last year it also acquired a 40 per cent stake in satirical website The Onion, and separately, the remnants of controversial digital publisher Gawker Media (which fell into bankruptcy after a lawsuit with billionaire Peter Thiel) for $135 million. RentPath and PropertyGuru have also made a number of bolt on acquisitions.
TPG also has stakes in Spotify and Airbnb, but it has not invested in a newspaper business before. And here, the track record of private equity is mixed at best.
The most famous private equity buyout in that sector involved Chicago real estate businessmen Sam Zell and Tribune Company, the publisher of the Chicago Tribune and the LA Times. It was widely considered an unmitigated disaster. The firm fell into bankruptcy during the financial crisis, and returned to the public markets in 2014.
Last year, it was widely ridiculed for rebranding itself as TRONC, but private equity can’t be blamed for that.