Fairfax CEO Greg Hywood
After months of speculation, it was revealed on Sunday that private equity groups TPG and Hellman & Friedman both declined to made a bid to acquire Fairfax Media, leaving the company back where it started with plans to spin off real estate arm Domain. The company was undergoing a severe round of cost-cutting during the wooing period, with 125 editorial staff taking redundancies in the middle of the uncertainty. So how did we get to this point?
February 22, 2017: Fairfax announces plans to spin off Domain
Following 5.8% growth in revenue in lucrative real estate asset Domain, Fairfax reveals it will split Domain into its own reporting entity, meaning the newspaper mastheads would stand on their own in the sharemarket. Fairfax CEO Greg Hywood says the Domain Group has reached significant financial targets needed to operate separately to Fairfax.
“The separation of Domain would further reshape the Fairfax portfolio by adopting a more flexible corporate structure to maximise shareholder value,” Hywood says.
Before the announcement, Fairfax’s share price was 80.87, cents and it goes up to 80.94 cents after the announcement.
May 5, 2017: TPG launches indicative proposal of Fairfax’s Domain and metro papers
Hywood confirms Fairfax Media is in talks with private equity consortium TPG to sell part of the troubled business. Under the initial proposal TPG would aquire the highly valued Domain real estate business as well as the metro newspapers The Sydney Morning Herald, The Age and The Australian Financial Review. The indicative proposal for a straight trade sale was valued at 95 cents a share. The proposal meant Fairfax shareholders would retain current assets in New Zealand, the regional newspapers business, Fairfax’s stake in the Macquarie Radio Network and the 50% share in Australian streaming company Stan. Hywood stresses in a letter to staff that talks are just preliminary and that there is “no certainty that the indicative proposal is capable of being implemented given the complexity involved in splitting the businesses”.
When TPG’s original proposal go public, Fairfax’s share price closes at $1.06 on the Friday.
May 14, 2017: TPG offers revised bid to buy all of Fairfax
TPG makes a revised $2.76 billion proposal to buy all of Fairfax, at $1.20 a share. Fairfax shares rises 8.4% to a six-year high of $1.16 following the announcement. The Fairfax board of directors say in a statement they will review the revised indicative proposal but again emphasise that it might not lead to an offer or even a recommendation from the board.
May 18, 2017: Hellman & Friedman also bids for Fairfax, due diligence granted for both bidders
A new suitor enters the race to acquire Fairfax as another American private equity firm looks at gaining control of 100% of the company. This time its Hellman & Friedman, offering $2.87 billion. The bid values the company between $1.225 and $1.250 a share, more than TPG’s offer. Hellman & Friedman is touted by media observer Mark Westfield as a “more credible” buyer due to previous associations with Fairfax. Hellman & Friedman senior adviser Brian Powers was a former chairman of Fairfax, during which he worked with current chairman Nick Falloon. Fairfax grants due diligence to both TPG and Hellman & Friedman, allowing them to analyse the books of the media company to assess if an appropriate deal can be reached.
June 30, 2017: Reports Hellman & Friedman will not submit a bid
The end of the financial year was the deadline set by Fairfax for both companies to put in final bids, but it is revealed that potential suitor Hellman & Friedman sent a letter to the Fairfax board indicating it will not be submitting a bid for acquisition. Fairfax refuses to confirm or deny the context of the letter but rumours of the failed bid send share prices down 8.3% to $1.10.
July 2, 2017: TPG abandons bid to buy Fairfax
After spending a month in the due diligence process, TPG exits the bid to acquire Fairfax. A professional investor in TPG admits that the spin off of Domain might not increase the value of the company as much as Fairfax is indicating. Fairfax confirms TPG will walk away from the proposed bid, leaving the company to continue spinning off Domain.
“TPG has today exited the Fairfax due diligence process and has elected not to proceed with an offer,” a spokesman says on Sunday.
CEO Greg Hywood announces the private equity process will not continue, stressing “it is back to business as usual”.
Hywood confirms Hellman & Friedman did not submit a binding bid, instead sending a letter indicating it is still interested, contrary to earlier reports. However, Hywood announces Fairfax has ceased the discussions for the potential takeover instead focusing on the plans to spin off Domain. Hywood says the company is making “excellent progress” and is on track to complete the split by the end of 2017. Fairfax’s stake in Domain will stay at 60% to 70%, with the remainder going to existing shareholders.
July 3, 2017: Fairfax share price falls
Following the decision by Fairfax to end the takeover process, its share price drops to $0.97 around noon.