Struggling Fairfax vulnerable to takeover: analyst

Struggling Fairfax vulnerable to takeover: analyst

Struggling Fairfax vulnerable to takeover: analyst

Updated 24 August 2012, 19:25 AEST

Some analysts believe Fairfax Media is now at risk of a private equity bid and being broken up, after shares plunged to a new low.

The company ended Friday trade at a record low of 45.5 cents a share as investors continued to sell following the full-year loss of $2.7 billion and the failed attempt by major investor Gina Rinehart to offload a third of her stake.

Late on Thursday Ms Rinehart tried to offload a 5 per cent stake through broker Morgan Stanley, with her dealers looking for anyone willing to buy at 50 cents a share.

But all the sales pitches in the world could not convince market participants to buy a slice of Fairfax at that price.

BBY analyst Mark McDonnell says Fairfax Media is in crisis and with the share price so low, it is vulnerable to a takeover.

"It's more and more likely that a private equity player will step up and look to delist," he said.

"It's also possible that there could be some break-up of the different assets in the business, so at these crisis levels change does look inevitable."

Mr McDonnell says the fall in advertising has continued to hit Fairfax hard.

"Really, quite a strong and accelerating trend in advertising away from print," he said.

"The difficulty that Fairfax has is that as much as it seeks to grow its online presence, and it's having some success there, the revenue in dollar terms is not enough to compensate for the decline in its core businesses."

Mr McDonnell is convinced Fairfax will need to change its stripes in order to survive in an environment that is currently eating it alive.

He says the number of share transactions hitting the market has been elevated in recent weeks, with around eight million sales a day.

In the past couple of days it has built up into a frenzy of up to 40 million shares swapping hands daily.

"That's only occurring because there are people who've decided they've had enough and are getting out, but there are other people who are looking at the share price where it is and seeing opportunity and thinking that the share price is now representing good value," he said.