Ten tipped to bid for Fairfax

INVESTORS yesterday backed the Ten Network as a key player in the forthcoming era of media ownership, as private equity also surfaced as a likely post-reform participant.

INVESTORS yesterday backed the Ten Network as a key player in the forthcoming era of media ownership, as private equity also surfaced as a likely post-reform participant.

Shares in Ten rose 10c yesterday to close at $3.24, on speculation the network might resume talks with a view to acquiring Fairfax Media.

The share activity followed a deal between Communications Minister Helen Coonan and the junior Coalition party, the Nationals.

Key Nationals senators were concerned the federal Government's planned media reforms would hurt regional areas and limit diversity.

Trading in Fairfax was up yesterday, with more than 5 million shares changing hands.

It also emerged that one fund manager, IOOF Holdings, had boosted its stake in the company by 20 per cent, but Fairfax's $4.47 closing price remained steady on the previous day's close.

Deutsche Bank analyst Andrew Anagnostellis said Fairfax had become an obvious target for private equity firms, which would in turn sell the company's assets to local groups.

"We think the most likely scenario is a break-up by a private equity player selling parts of the business to those people who want it. It might be divided up among a number of media players - we put a 50 per cent probability on that. Even if the rules change, we stick to that," Mr Anagnostellis said.

IOOF Holdings last week raised its stake in Fairfax Media, announcing yesterday it now held over 6 per cent of the company. But it downplayed a potential takeover motive for its purchase.

"We have been a buyer of Fairfax for some months at around the $4 level. It has been out of favour and we believe it offers good value," John Murray, managing director of IOOF's Perennial Value Management, said.

"We have viewed any corporate activity in Fairfax, on the back of possible media reform, as an added bonus if it occurred," Mr Murray said.

Mr Anagnostellis stressed Fairfax was a "big buy for any one company - people often forget it is a company worth over $6 billion. (A Fairfax buyer) would have to be a consortium of players. It's a complex, big undertaking".

Macquarie or Telstra would also be looking at Fairfax, Mr Anagnostellis said, adding that it was unlikely Rural Press would bid outright.

"The rules, as they stand, do not prevent Rural Press and West Australian Newspapers acquiring Fairfax today. (If) Rural Press hasn't acquired (it) until now - this makes it unlikely that they will. I don't think they're seduced by getting back the farm," he said.

Commsec media analysts Craig Shepherd and Silvia Spadea were urging clients to buy into Network Ten. "Ten (and) Fairfax is the play with the most value and highest likelihood of success.

"Ten does not own any significant internet or magazine interests. A merger of Fairfax and Ten represents a viable and ACCC-acceptable merger," they said.