The interest by private equity firms in buying the Fairfax Media business has seen its share price valued at $1.50 a share or the business in its entirety valued at $3.5 billion according to a new report by analysts Morgan Stanley.
The news will be sweet for Fairfax shareholders who have publicly claimed the two bids for the company, both by US private equity firms over the past fortnight, are way off the mark.
TPG Capital’s initial bid was $2.2 billion, however, it was only for the mastheads and the lucrative Domain real estate website. It later changed its bid $2.75 billion which included all of the company’s assets.
However, a new bidder, Hellman & Friedman, offered $3 billion for the company last Thursday.
Both bids estimated the company share price around the $1.20-1.25 mark, not the $1.50 proposed by Morgan Stanley
Fairfax has reported it is to fully open its books to both bidders to they can perform the appropriate due diligence on the business.
However, Morgan Stanley analyst Andrew McLeod has urged Fairfax not to rush the sale, saying the company’s plans to turn Domain into its own separate company could see the business worth a lot more than is currently being estimated.
McLeod commented: “This is not a situation where the company is battling too-high debt, has only assets that are in structural decline, and has no strategy to extract value for its shareholders. On the contrary, FXJ effectively has no debt, and 80 per cent of value is tied to its online asset Domain, which has a long runway for positive structural growth.”