Fairfax Media investor Alex Waislitz has "strongly encouraged" the publisher to press ahead with the spin-off of its lucrative Domain property classifieds business despite it being in takeover talks with potential buyers.
The chairman of Thorney Opportunities says the investment house had long called on Fairfax to unlock value within the company.
Mr Waislitz said in a Thorney shareholder update that two recent takeover approaches for Fairfax from private equity showed the wisdom of this advice.
He said the approaches had undervalued Fairfax, and that private equity firms only seek to take control of a company if they can see a minimum potential 20 per cent profit within a few years.
"We strongly encourage FXJ not to give up on its own announced plans to spin off Domain," Mr Waislitz said on Thursday.
"If Fairfax can demonstrate that it is the best candidate to realise that additional upside then all existing FXJ shareholders would get the benefit of any future value uplift rather than just the successful private equity bidder."
Mr Waislitz said Domain's potential to generate earnings before interest, tax, depreciation and amortisation of $200 million or more meant Fairfax was worth about $4 billion.
TPG Capital and Ontario Teachers' Pension Plan Board have offered $2.76 billion for the newspaper publisher.
A subsequent bid from San Francisco-based Hellman & Friedman placed a marginally higher value on the company of between $2.82 billion and $2.87 billion.
Fairfax shares were unchanged at $1.215 on Thursday, valuing the company at $2.8 billion.
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