Fairfax Media Rises on TPG Bid Proposal

Fairfax Media Ltd [ASX:FXJ] opened up 5.5% this morning, to a high of $1.12.

What happened to Fairfax Media Ltd’s Share Price?

This morning, FXJ told investors that they’d received unsolicited interest from private equity firm TPG Group. TPG wishes to acquire Domain Group, Australian Metro Media and Events and Digital Ventures (excluding Stan) for a cash consideration of 95 cents per share.

The proposal is subject to a number of conditions which includes due diligence, shareholder approval and obtaining requisite regulatory approvals, including Foreign Investment Review Board approval.

What now for the Fairfax Share Price?

According to The Australian:

Fairfax investor Alex Waislitz has dismissed TPG’s $2.2 billion bid for Fairfax, saying the offer undervalues real estate listings business Domain.

In the first comments by one of the publisher’s shareholders, Mr Waislitz told The Australian: “While I haven’t yet seen any of the details, based on the potential for substantial profit increases for the Domain group in coming years, the cash component of the bid appears to be on the low side.”

Nothing has happened yet. Fairfax is still reviewing the proposal. Yet I believe it’s likely they could reject the initial offer with the hope of a higher counteroffer from TPG.

Domain’s closest competitor, REA Group Ltd [ASX:REA], is valued at $8.4 billion. While it’s not guaranteed Domain will enjoy the same success, it could encourage TPG to come back with a higher bid if their initial proposal is shot down.

I’d suggest you watch the FXJ Share Price from afar. Even if they reject TPG’s bid, the spin-off of Domain could potentially be a highly-profitable investment.

Regards,

Härje Ronngard,

Junior Analyst, Money Morning

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