Fairfax Media is becoming the cheapest bid
for potential buyers who still eyeing newspaper business, Bloomberg
reported.
With shares slumping already 87 percent in
the past five years, the company trades at 0.3 times its book value – the
lowest among media companies around the globe with market capitalisations over
$1 billion, according to Bloomberg. On average, for media companies with market
values of at least $1 billion, shares are priced at 4.2 times the value of
their net assets.
A leading investor in the company confirmed
it would consider support a break-up of the company, making Fairfax Media – Australia ’s
second-largest newspaper publisher – a target for private equity, the Australian reported.
Fairfax Media, owning the Sydney Morning
Herald and the Australian Financial review, find it hard to get through a time
when news market is flooded with new digital entrants. The company is faced
with a re-evaluation of its mastheads on the balance sheet while being
restructured towards digital, the Reuters reported, citing anonymous board
members.
The company’s goodwill and intangibles were
downgraded by Citigroup from A$ 5.25 billion
in the previous year to A$ 4.98 billion ($ 4.92 billion) in the 2012 financial
year, the Reuters added.
“The
Sydney-based publisher, which controls New Zealand online auction site Trade Me
Ltd. (TME), as well as four of Australia’s ten biggest papers and the country’s
top dating site, may now be cheap enough to attract leveraged buyout firms,” Bloomberg
reported, citing Platypus Asset Management Pty and Tribeca Investment Partners
Pty.
“Clearly private equity would have interest in it…they’ve shown interest in a lot of things that can be broken up. The share price decline has probably been too aggressive,” said Platypus Asset Management’s Prasad Patkar, Bloomberg quoted.
Despite that the share price is still
trading record low, the Australian noted.
According to the Australian, the idea of breaking up the company is crystallised in a series of stages selling the group’s assets. The initial stage is the sale of part of online auction group Trade Me, followed by the Metro division housing its most famous newspaper mastheads. A third stage would be the radio assets, which include 2UE and 3AW.
Last month, the company was caught in media coverage about its employee’s strike against outsourcing of some production roles to
The company’s other restructuring initiative towards digital also raise doubts. “It’s very unclear if online can offset the accelerating decline in print, particularly given the strong headwinds at a macro level and a tough trading environment,” another report of the Australian quoted an anonymous source.
Image: The Australian
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