Analysts are split on whether Fairfax Media is likely to fall to the latest takeover bid by US-based private equity giant TPG Capital and Canada's Ontario Teachers' Pension Plan Board.
Deutsche analyst Entcho Raykovski said the "compelling" $2.76 billion offer required engagement from the Fairfax board, while Citi analyst David Kaynes said the all-cash offer is highly likely to proceed.
But Fairfax's second-largest shareholder, investment firm Legg Mason, called on directors to reject the $1.20 per share bid and Morningstar analyst Brian Han believes a rival offer is not out of the question.
Mr Han said the relaxation of media ownership laws flagged ahead of the federal budget may have emboldened the consortium to bid for the whole of Fairfax, on the assumption it can offload any assets it doesn't want.
"The possible change in the regulatory landscape also presents Fairfax with options, either as a target for another suitor or to turn itself into an acquirer," Mr Han said in a note to investors.
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The businesses likely to be offloaded include community newspapers, New Zealand media, and Fairfax's stakes in Macquarie Media radio and Netflix rival Stan.
Mr Kaynes said the new takeover offer was at the lower end of the range indicated by the consortium's initial bid for Fairfax assets including the Domain real estate classifieds business and flagship newspapers including The Sydney Morning Herald and The Age.
"There may be scope for a higher offer, even without a competing bid," he said.
The improved offer lifted Fairfax shares to their highest level in six years on Monday but the Fairfax-owned Australian Financial Review quoted the chief investment officer at Legg Mason Martin Currie Australia as saying the bid undervalued the company.
"We believe the bid materially undervalues the prospects for Fairfax given the growth in Domain, the digital transformation of mastheads and the strategic value with changed media laws," said Reece Birtles, whose employer owns 6.1 per cent of Fairfax.
Fairfax shares were up 2.5 cents, or 2.2 per cent, at $1.165 at 1438 AEST.
"Given that any final offer remains subject to due diligence, we are of the view that Fairfax will likely trade at a discount to terms until there is greater certainty of a final cash offer," Mr Raykovski said.
