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Takeover: Is the Fairfax Media Limited share price worth $1.20?

The Fairfax Media Limited (ASX: FXJ) share price is worth $1.20 in cash, according to the latest takeover offer from TPG Group.

A Fairfax break-up?

Fairfax Media is the owner of popular newspapers like The Sydney Morning Herald, The Age, Australian Financial Review and much more. It also owns Domain, the online property portal. These are the most popular businesses controlled by Fairfax, but there are plenty of others.

Under the original takeover offer proposed by private equity firm TPG Group and the Ontario Teachers’ Pension Plan Board, Fairfax would be broken up. The acquirers would take Domain and the major news businesses, with the remaining cluster of businesses listed on the sharemarket in a new company. Shareholders would have received $0.95 cash, as well as shares in the new company. Combined, the deal valued Fairfax shares between $1.20 and $1.25.

TPG takeover

In an announcement to the ASX today, Fairfax’s board revealed that the TPG consortium has now offered to acquire all shares in Fairfax for $1.20 in cash. While the deal is valued slightly less than the original offer, it adds certainty to the value for shareholders.

However, the deal remains subject to a number of conditions including due diligence and a batch of regulatory approvals.

What now?

The proposed deal will be inviting for long-suffering shareholders, who have watched the value of their Fairfax shares fall from almost $5 to a low of $0.36 back in 2012.

The Fairfax board says shareholders should not yet act on the deal and are reminded that they plan to divest the high-performing Domain business on the ASX, which will unlock value.

However, many companies like News Corp (ASX: NWS), the owner of The Australian, Macquarie Media Ltd (ASX: MRN) and others, are being structurally challenged by the likes of online news channels and digital radio. Therefore, the deal may provide a clean break for long-term investors looking for other places to grow their wealth.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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