Private equity group TPG just made a new all cash $2.7 billion offer for Fairfax

Fairfax Media’s offices in Sydney. Peter Parks/AFP/Getty Images

US private equity giant TPG has changed its bid for Fairfax Media to $2.76 billion, all in cash.

Fairfax says it has received a revised bid of $1.20 per share. Its shares on Friday closed at $1.07. In early trade today, Fairfax shares rose 7% to $1.147.

Previously the joint bid with the Ontario Teachers’ Pension Plan Board was for a combination of $2.18 billion in cash at 95 cents a share plus shares.

However, the latest offer is for all the company.

Last week’s offer would have meant the private equity consortium ending up owning the lucrative Domain business plus the major mastheads — the Sydney Morning Herald, The Age, The Australian Financial Review — and some digital assets.

The rest of the company, including radio assets, regional and community newspapers and a half shares in streaming media joint venture Stan, would have moved to a new listed entity to be owned by current shareholders.

Fairafx hasn’t official accepted or rejected the 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.

The revised TPG bid is subject to a number of conditions, including due diligence, shareholder approval, and regulatory approvals including from the Australian Foreign Investment Review Board and New Zealand Overseas Investment Office.

The Fairfax board of directors is reviewing the revised proposal.

“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,” the board said.

“Fairfax is continuing to progress the preparation for the announced potential separation of Domain Group.”

Macquarie Capital and Herbert Smith Freehills are advising Fairfax.

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

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