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Fairfax ponders $2.5b TPG buyout proposal

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Fairfax Media is reviewing an indicative takeover proposal from private investment firm TPG Capital and Ontario Teacher’s Pension Plan that would result in a straight trade sale of the company’s three major mastheads and real estate listings business, Domain.

The unsolicited proposal would demerge the current business, with TPG Capital singling out The Age, The Sydney Morning Herald and The Australian Financial Review, along with Domain, Fairfax’s events business and other digital ventures, as its desired assets under the name Domain Co. The firm would pay 95c per share, equivalent to almost $2.5 billion under the terms of the offer.

Fairfax’s remaining assets would be listed under another name. This would contain Australian Community Media, New Zealand Media, shareholdings in Macquarie Media and Stan and retain Fairfax’s current debt. Existing Fairfax shareholders would retain 100 per cent stake in the new division.

Fairfax board members have been deliberating on the proposal since Sunday evening. A decision is expected early next week.

A number of shareholders have spoken out against the proposal including the company’s second largest shareholder, Legg Mason Martin Currie, because of concerns it undervalued the Domain business.

As outlined in Fairfax Media’s ASX announcement, one of the key assumptions of the deal includes Domain Co’s purchase on a cash-free/debt-free basis.

Key conditions include the unanimous recommendation of the Fairfax board, agreeance to the proposed demerger scheme and the inclusion of deal protection mechanisms.

The proposal follows a week of staff industrial action sparked by the company’s decision to cut 125 jobs from metro newsrooms as part of a restructure.

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