Is private equity interest in Fairfax from US groups TPG (and its Canadian partner) and Hellman and Friedman, about to wane, with worries about financial forecasts surfacing and at least one big shareholder opposed to any takeover.
Yesterday’s Australian Financial Review’s Street Talk column reported that (http://www.afr.com/street-talk/pe-bidders-squeeze-lenders-as-fairfax-media-auction-heats-up-20170620-gwv71e) Fairfax’s profits and other forecasts might not as solid as the board would like them to be?
At the same time a Fairfax shareholder has urged the board not to sell out and to continue plans to spin off some of its Domain property arm.
Alex Waislitz, chairman of Melbourne-based Thorney Investment Group, told Fairfax Media that there is more upside for Fairfax investors.
“We strongly encourage [Fairfax] not to give up on its own announced plans to spin off Domain," Waislitz reportedly told his clients.
“After all, private equity never seeks to take control of a company unless it can see a potential exit upside of at least 20 per cent within a few years. If Fairfax can demonstrate that it is the best candidate to realise that additional upside then all existing [Fairfax] shareholders would get the benefit of any future value uplift rather than just the successful private equity bidder.
According to Fairfax Media reports Waislitz, reckons that the company could be worth $4 billion one day if they spin off part of Domain (30% to 40% is the plan later this year). Fairfax is currently valued at $2.8 bullion – up 36% so far this year, which is all due to the takeover interest and not the company’s actual performance.
Meanwhile the AFR’s Street talk reported yesterday that “It’s understood some lenders have raised concerns about the quality of Fairfax Media’s earnings, particularly future forecasts in the traditional media business.”
"While the banks went into the dataroom knowing what Fairfax Media’s historical earnings looked like, it’s management’s read on the future that has proved troubling. It means the two would-be buyers have some way to go before each can get investment committee approval for a bid.
"The less debt available for a transaction, or the more onerous or restrictive the lenders’ terms, the harder it will be for either camp to stump up a binding bid. Perhaps it’s all part of the M&A game going on between the lenders and would-be owners, and those bidders with Fairfax Media.
"The proof will be in the coming fortnight when binding offers are due. Investment banks including Citi, Credit Suisse, Goldman Sachs, JPMorgan and UBS are known to be in the would-be lending syndicates, as well as representatives from local banks,” according to Street Talk.
"Hellman and Friedman have indicated it could offer between $1.225 and $1.25 a share for Fairfax while TPG is around $1.20 a share.
Fairfax shares closed at $1.215 on Wednesday, down a cent on the day and at $1.22 yesterday, so punters in te stock were not panicked by the suggestion in Street Talk.
