US private equity giant TPG Capital has ditched plans for a $2.76 billion takeover of Fairfax Media, clearing the way for rival bidder Hellman & Friedman to make an offer.
TPG on Sunday confirmed reports it had pulled out of the race to buy the owner of newspaper titles including The Sydney Morning Herald and The Age, as well as lucrative online property classifieds business Domain after spending a month examining Fairfax's books.
"TPG has today exited the Fairfax due diligence process and has elected not to proceed with an offer," a spokesman said in a statement to AAP.
"TPG thanks the board and senior management team of Fairfax for the integrity and focus they have brought to the discussions.
"We commend the current management for the job they are doing in managing and growing a valuable collection of traditional and new media assets."
TPG and Ontario Teachers' Pension Plan Board originally made a bid for Fairfax in May, initially offering 95 cents a share and quickly increasing it to $1.20.
Rival suitor Hellman & Friedman soon followed with an offer valued at between $1.225 and $1.25 a share, valuing Fairfax at up to $2.87 billion.
However TPG wrote to Fairfax chairman Nick Falloon on Sunday to tell him of its decision to walk away, The Australian Financial Review reported.
Hellman & Friedman has also written to Fairfax indicating it's still interested in making an offer but has yet to submit a binding bid, according to the Fairfax-owned AFR.
Both had been carrying out due diligence on Fairfax for much of the past month and were given until last Friday to submit formal offers.
But TPG decided to pull out amid concerns about the future valuations of Domain, The Australian reported.
"Fairfax had planned to spin off the assets but a serious professional investor in TPG has made clear the future of the business is not as bullish as the company has indicated," it said.
Shares in Fairfax fell 10 cents, or 8.3 per cent, to close at $1.10 last Friday.
The AFR said Fairfax was expected to announce on Monday that it would push ahead with plans to spin off the lucrative property classifieds business Domain from its other media assets, a move backed key investor Thorney Opportunities.
Thorney chairman Alex Waislitz wrote in an update to shareholders last week that the takeover approaches from TPG and Hellman & Friedman undervalued Fairfax.
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