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US private equity giant TPG proposes buying Domain and Fairfax's metro newspapers

The Fairfax Media Headquarters in Pyrmont, Sydney. Photo: Cameron Spencer/Getty Images

Fairfax Media is considering a fresh proposal from US private equity giant TPG Capital to buy the Domain real estate business and its metro publishing division which publishes The Sydney Morning Herald and The Age, as well as a range of other assets.

Fairfax CEO Greg Hywood confirmed in an email to staff today that there had been a “preliminary indicative proposal” from a consortium led by TPG to buy most of the business.

He emphasised the proposal was subject to a number of conditions including approval from the Foreign Investment Review Board, and that there was “no certainty that the indicative proposal is capable of being implemented given the complexity involved in splitting the businesses.”

The deal would involve TPG acquiring Domain, Australian Metro Media, and Fairfax’s Events business, as well as Digital Ventures, which includes Allure Media, the division company which publishes Business Insider and other global titles in the Australian market, commercial weather information provider Weatherzone, and the joint venture that publishes The Huffington Post in Australia.

Digital Ventures also runs Fairfax’s 50% interest in streaming video service Stan, which TPG is not proposing to buy.

Fairfax shareholders would receive scrip for the remaining assets: Australian Community Media, New Zealand Publishing, shareholdings in Macquarie Media Limited, Stan, and Fairfax’s net indebtedness. This company would remain listed on the ASX.

“Appropriately, the Fairfax Board is reviewing the indicative proposal,” Hywood said in his email (which you can read in full below).

The company’s metro publishing division is currently dealing with a week-long strike by journalists over proposals to shed a further 125 staff as part of a $30 million cost-reduction programme. The TPG proposal is reported to cast the metro publishing division as an important distribution channel for the Domain product.

The approach from TPG follows a market update last week from Hywood, in which he explained Fairfax’s current proposal to split Domain from the company this calendar year – and list it separately while holding a 60-70% controlling stake – remained on track.

TPG Capital has been interested in Fairfax Media for some time. The new proposal arrived on Friday night, Australian time and the Fairfax board met on Saturday.

The Australian reported that the TPG proposal “goes to some lengths to stress the importance of an independent and vibrant Fairfax media business to Australian democracy.”

A Fairfax spokesman declined to comment.

The company is expected to update the ASX on Monday morning. Its share price closed on Friday at $1.06, giving it a market cap of $2.44 billion.

Morgan Stanley analysts recently valued Domain at $2.05 billion, with Metro Media at $116 million.

Here’s Hywood’s full message to staff:

Indicative Proposal from TPG Consortium

All,

On Friday evening Fairfax Media received a preliminary indicative proposal from a consortium led by private equity firm TPG. The indicative proposal was unsolicited and is non-binding and is subject to a number of conditions including FIRB approval.

We will formally advise the Australian Securities Exchange in the morning.

TPG’s proposal is to acquire Domain, Australian Metro Media, Events and Digital Ventures (excluding Stan) businesses for cash consideration; with existing Fairfax shareholders to receive scrip representing 100% of Australian Community Media, New Zealand Publishing, shareholdings in Macquarie Media Limited and Stan and the existing Fairfax net indebtedness.

Appropriately, the Fairfax Board is reviewing the indicative proposal.

There is no certainty that the 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. There is also no certainty that the indicative proposal is capable of being implemented given the complexity involved in splitting the businesses.

Regardless of the indicative proposal, we will continue with our present strategies including our announced Metro changes and the potential separation of Domain Group.

Regards,

Greg


Disclosure: Business Insider Australia’s publishing company, Allure Media, is 100% owned by Fairfax Media.

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