May 15, 2017 Last Updated 9:55 am

Fairfax Media receives revised bid from consortium led by the U.S. private equity company TPG

But the bid may still not receive a positive hearing as many shareholders are enthusiastic about the company’s announced plan to spin off its digital real estate service Domain

The word entering the weekend was that Fairfax Media, the publisher of The Sydney Morning Herald, would be rejecting the bid put forward by the consortium creatred by the US private equity group TPG Capital and the Ontario Teachers Pension Plan. But on Monday Fairfax received a new $2.7 billion bid, described as a 40 percent premium on Fairfax’s share price.

The new offer is $1.20 per share, while the older offer was 95 cents per share. The TPG consortium is bidding on part of the business: the online property classifieds business Domain as well as the newspapers The Sydney Morning Herald, The Age and The Australian Financial Review.

Last week’s bid was deemed far too low, with one shareholder quoted as saying “it’s an easy thanks but no thanks.”

“It’s a troublesome structure to say that we get 95 cents for the good business and you get to keep the debt for the transition businesses,”said Lee Mickelburough, head of Australian equities at Henderson Global Investors. “It’s cheeky, the way they’ve structured it.”

Early reports are that major shareholders still think the revised bid too low, but as we have seen with other recently rejected media bids, a rejected bid only drives down the stock price. Right now Fairfax shares are near their 52-week high thanks to an announcement that the company would spin off its digital real state service Domain. Shareholders are eager to see this occur, it appears, rather than a straight sale of its most valuable assets.

Here is the announcement of the revised bid from the TPG led consortium:

SYDNEY, Aus. — May 15, 2017: — Fairfax Media Limited on 14 May 2017 received a revised, indicative, preliminary and non-binding proposal from a consortium including TPG Group (TPG) and Ontario Teachers’ Pension Plan Board (together with its affiliates, OTTP) (collectively, the TPG Consortium) to acquire 100% of the shares in Fairfax (on a fully diluted basis) at a price of $1.20 per share (less the value of any dividends or other distributions declared, proposed or paid after 14 May 2017), with all consideration being in cash (Revised Indicative Proposal).

The Revised Indicative Proposal follows the Indicative Proposal of $1.20 – $1.25 per share, which was recently received from the TPG Consortium, as announced on 8 May 2017.

The Revised Indicative Proposal is subject to a number of conditions, including due diligence, shareholder approval at a Fairfax scheme meeting which would be required to implement the Revised Indicative Proposal, and obtaining requisite regulatory approvals, including approval from the Australian Foreign Investment Review Board (FIRB) and New Zealand Overseas Investment Office (OIO), and other conditions outlined below.

The Fairfax Board of Directors is reviewing the Revised Indicative Proposal. The Fairfax Board notes that there is no certainty that the Revised Indicative Proposal will result in an offer for Fairfax, what the terms of any offer would be, or whether there will be a recommendation by the Fairfax Board.

Fairfax shareholders do not need to take any action in response to the Revised Indicative Proposal and the Fairfax Board will update shareholders when it has been fully assessed.

Regardless of whether the Revised Indicative Proposal proceeds to an offer for Fairfax, the Fairfax Board believes that Fairfax has an announced strategy for the future that will deliver value for shareholders. Fairfax is continuing to progress the preparation for the announced potential separation of Domain Group.

Macquarie Capital and Herbert Smith Freehills are advising Fairfax.

Comments are closed.