Farfax shares hit a high as a new takeover offer arrives

Peter Parks/AFP/Getty Images

Shares in Fairfax Media, now subject to two takeover bids from private equity groups, jumped in early trade.

A short time ago, they were up 6.6% to $1.237 in a falling market.

The latest bid is an all cash play from San Francisco-based private equity group Hellman and Friedman at a price between $1.225 and $1.250 a share.

That values Fairfax at $2.87 billion, and ahead of the $2.76 billion bid at $1.20 a share from the TPG Group and the Ontario Teachers’ Pension Plan Board.

Both groups have been given the go ahead to conduct diligence on Fairfax.

“The Fairfax board appreciates the support shareholders have demonstrated for Fairfax’s current strategy and the potential separation of the Domain Group,” says Fairfax chairman Nick Falloon.

“We have carefully considered the indicative proposals and believe it is in the best interests of shareholders to grant both parties due diligence to explore whether a potential whole of company proposal is available.”

Fairfax has neither accepted nor rejected either offer but analysts have valued the Domain business alone at more than $2.05 billion.

And foreshadowed changes to media rules could also push higher the valuation of Fairfax’s newspapers.

The federal government has announced plans for the elimination of the “two out of three” rule. This means one company would be able to own metropolitan newspapers, television and radio stations in any capital city.

Fairfax also has been stripping out costs from the major newspapers, a move that also makes the mastheads increasingly attractive.

Journalists in the metro division went on strike for a week over a plan to cut 125 staff as part of $30 million in cost savings.

(Disclosure: Allure Media, the publisher of Business Insider, is 100% owned by Fairfax Media.)

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