It was hardly the most stunning reception for a higher takeover bid, but the new conditional $1.20 a share cash offer for Fairfax Media (FXJ) has at least started the ball rolling towards some sort of finality.
Last week TPG and its Ontario Teachers Fund partner offered 95 cents cash a share for Fairfax Media’ Domain property website, plus the Sydney Morning Herald, Melbourne Age, Australian Financial Review, the websites and add on digital and the smaller businesses (and no debt).
The duo didn’t want the Fairfax community and regional papers nor the radio business (mostly AM stations 2GB in Sydney and 3AW in Melbourne) and the NZ newspapers and the Stan streaming video business owned with Nine Entertainment.
Yesterday that was lifted to $1.20 a share – Fairfax said ‘we’ll have another look and et you know’ to shareholders. Fairfax shares jumped more than 8% to $1.16 (a six year high), then came back to trade just over $1.14, up 6.7%, but hardly a ringing endorsement of the higher price.
But TPG and its partner do have a problem with the higher price – it’s not all that high and will need to be around $1.30 for a decent chance to win over the Fairfax board.
You see that after lobbing the 95 cents a share cheapskate offer, TPG then briefed the media that all up the 95 cents cash and the bits left behind were worth around $1.25 a share to Fairfax shareholders.
And TPG and its Canadian mate wanted its purchases to be debt free – Fairfax had more than $240 million in debt at December 31.
So what do we see announced on Monday morning? Why a bid for all of Fairfax at $1.20 each – five cents less than the briefed value from last week. The new price values the company at $2.7 billion and add in the debt and its total value if close to $3 billion.
TPG owns around 4.7% of Fairfax Media and a total bid value of over $3 billion (including debt), plus the final dividend and any franking credits would probably win over shareholders, some of whom have told TPG to lift its game.
“While the revised offer is clearly superior in that is an offer for the entire company, TPG may need to offer more than $1.20 if it is to win the support of all shareholders,” according to Alex Waislitz, chairman of Melbourne-based Thorney Opportunities Ltd, which owns Fairfax shares.
The Fairfax board Monday morning said it was reviewing the “revised, indicative, preliminary and non-binding” proposal and would update shareholders when it had been fully assessed. Regardless of the proposal, Fairfax is continuing to progress the preparation for its spin-off and listing of the Domain business later this year, the company said.
Fairfax said the new "Indicative Proposal is subject to a number of conditions, including due diligence, shareholder approval at a Fairfax scheme meeting which would be required to implement the Revised Indicative Proposal, and obtaining requisite regulatory approvals, including approval from the Australian Foreign Investment Review Board and New Zealand Overseas Investment Office, and other conditions outlined below.
"The Fairfax Board of Directors is reviewing the Revised Indicative Proposal. The Fairfax Board notes that there is no certainty that the Revised 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. Fairfax shareholders do not need to take any action in response to the Revised Indicative Proposal and the Fairfax Board will update shareholders when it has been fully assessed,” Fairfax directors said.
