(Recasts, adds background, comment from Fairfax and TPG)
SYDNEY, March 29 (Reuters) - U.S. private equity group TPG Capital is weighing whether to make a takeover offer for Australia's Fairfax Media Ltd (FXJ) as the target proceeds with plans to spin off its real estate classified advertising arm, The Australian Financial Review reported on Wednesday.
Shares in Australia's Fairfax Media, which has a market value of A$2.4 billion ($1.83 billion), rose as much as 7.5 percent to the highest level since 2011 following the newspaper report.
The newspaper, which is owned by Fairfax, said TPG was believed to have amassed shares in the company and was weighing whether to make a full bid. It did not say where it received the information.
Representatives of Fairfax and TPG declined to comment. Fairfax owns the oldest continuously published newspaper in Australia, The Sydney Morning Herald, as well as other publications and a real estate classified division, Domain Group.
On Feb. 22, Fairfax said it planned to demerge Domain, which runs the second-biggest property listing website in Australia and is valued by analysts at about A$2 billion.
With soaring property prices fuelling advertising income, investors have long called for Domain to be listed as a separate entity and freed of its more traditional news media stable-mates, which have been losing advertising revenue for years.
While unlocking value for shareholders, a demerger would make Fairfax more reliant on newspapers in structural decline, as advertising migrates online and foreign rivals like The New York Times boost their online presence in Australia.
($1 = 1.3103 Australian dollars)
