PE bidders squeeze lenders as Fairfax Media auction heats up
http://www.copyright link/content/dam/images/z/s/q/y/h/image.related.afrArticleLead.620x350.gwv71e.png/1498053799764.jpg
It's three weeks into Fairfax Media due diligence, and some key stakeholders are getting nervous.
While would-be buyers TPG and Hellman & Friedman crunch through available historical and forecast numbers in an effort to come up with binding bids, it's their lined up lenders that are having pause for thought.
Sources close to the lenders told Street Talk that there were some awkward conversations to be had with the private equity buyers.
While the lenders talked a big game to get into the dataroom with the respective tyrekickers, some are trying to back out of their original commitment sizes.
What's worse is that some of the lenders - including representatives from the big investment banks - are in both buyer camps, running separate trees with separate dealmakers but trying to fund either bid should it be successful.
It's understood some lenders have raised concerns about the quality of Fairfax Media's earnings, particularly future forecasts in the traditional media business. While the banks went into the dataroom knowing what Fairfax Media's historical earnings looked like, it's management's read on the future that has proved troubling.
It means the two would-be buyers have some way to go before each can get investment committee approval for a bid.
The less debt available for a transaction, or the more onerous or restrictive the lenders' terms, the harder it will be for either camp to stump up a binding bid.
Perhaps it's all part of the M&A game going on between the lenders and would-be owners, and those bidders with Fairfax Media. The proof will be in the coming fortnight when binding offers are due.
Investment banks including Citi, Credit Suisse, Goldman Sachs, JPMorgan and UBS are known to be in the would-be lending syndicates, as well as representatives from local banks. Hellman & Friedman has an indicative $1.225 to $1.25 a share bid on the table, while TPG secured dataroom access with a $1.20 a share proposal.
Fairfax Media shares closed at $1.215 on Wednesday, down 1¢ in the day's trade and down 2¢ in the past week, valuing the company at $2.8 billion.
Fairfax Media, advised by Macquarie Capital and Herbert Smith Freehills, is publisher of The Australian Financial Review.
Interestingly, Street Talk understands Sydney-based Anchorage Capital Partners had been keeping a close eye on proceedings up until recently, studying whether it would be possible to secure a deal for the company's Australian Community Media business, which includes regional newspapers.
Sources said Anchorage's plan was to work with rival publisher News Corp to come up with a more efficiently run and streamlined business, sharing facilities including printing and other costs such as distribution.
It's understood the firm approached both TPG and Hellman & Friedman, however it came to nothing.
