Via the AFR:
Private equity giant TPG Capital is believed to have quietly amassed shares in Fairfax Media, as it weighs up whether to make a full bid for the online property portal and media group as soon as this week.
More than 18.5 million shares changed hands on Monday, and a further 17.13 million on Tuesday, slightly higher than usual volumes.
Both TPG and Fairfax Media declined to comment on whether the private equity fund had bought a stake, thought to be up to 4.9 per cent of the company.
No foreign buyer can own more than 5 per cent of an Australian media company without approval from the Foreign Investment Review Board. Investors are not required to publicly disclose shareholdings of less than 5 per cent.
As revealed by The Australian Financial Review’s Street Talk column, TPG is lining up financing and co-investors to table a bid as early as this week for Fairfax, publisher of the Financial Review.
Domain – the country’s number two online property portal, which is run by Antony Catalano – is the key to any TPG deal, and accounts for most if not all of Fairfax’s $2.5 billion market capitalisation.
So, what will TPG do with it? Domain competitor, REA, has a market capitalisation of $8bn. Can Domain be loosed from its Fairfax straight jacket to create that kind of value? Could it just shed everything but Domain given everything else is shrinking?
Presumably TPG realises that although the old media groups in the firm are dying, they offer a lot of value to Domain as a funnel for eyeballs so that seems doubtful. Even News retains a one third share in REA.
However, it is also true to say that many of the legacy businesses don’t add much value to the primary profit centre so a lot of fat could be cut through closing, selling, merging and shutting print versions of various mastheads. That’s what I’d do if I were cold-hearted private equity.
Hard to see Domainfax output improving!
A word to the wise. The other thing I would do if I were PE is flip this thing fast. It does not want to be left holding Domain when the next global shock takes Australian property to the woodshed.
