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Shares in Fairfax Media jumped to their highest level in six years on Wednesday following a report that private equity group TPG is mulling a bid for the group, which publishes the Sydney Morning Herald newspaper.
Fairfax shares rose 7.5 per cent to A$1.14- the highest level since May 2011- following a report in the Australian Financial Review, a Fairfax-owned newspaper, that TPG had acquired a stake of up to 4.9 per cent in the media group.
Last month Fairfax revealed plans to spin off a stake in its real estate advertising arm Domain, which analysts say is the most valuable part of a media empire that spans radio, newspapers and internet businesses.
Fairfax, which has a market capitalisation of about A$2.5bn ($1.9bn), has struggled over recent years as it attempts to reposition its newspaper titles in a media market that is moving online. But steep cost cutting over recent years has stabilised the group, which reported an underlying profit of A$84.7m for the six months to the end of December 2016, a rise of 6 per cent on the same period a year earlier.
Alex Waislitz, chairman of Thorney Investments, which owns shares in Fairfax, said there was good value in Fairfax and the group was definitely in play. He said Fairfax’s print media titles still had strong cash flows, despite the transition they were undergoing, while Domain was a valuable asset.
“My instinct is that they would need to offer a premium of at least 10-20 per cent above today’s price levels to get any transaction,” said Mr Waislitz.
However, neither Fairfax nor TPG has made any comment on the report. Within an hour of ASX trading opening Fairfax shares had given up some of their early gains, slipping back to A$1.09 an hour later, a rise of 2 per cent.