Prime time for Fairfax takeover: analyst

Kerry Stokes' Seven Network has a "once in a lifetime" opportunity to make a takeover bid for Fairfax Media, an analyst says.

Citigroup analyst Digby Gilmour has analysed a potential tie-up of Seven and Fairfax, publisher of nine New Zealand daily newspapers and 60 community papers, as well several Australian papers including the Sydney Morning Herald.

Gilmour said he believed Seven may consider spending some of its cash on Fairfax, because the publisher's shares were at historic lows and the Fairfax family's blocking stake had been diluted to below 10 per cent after the company's A$624.6 million ($756.3 million) capital raising.

Seven is cashed up, with about A$1.4 billion in cash on hand as of December 2008, after selling its television, magazine and internet assets into Seven Media Group, a joint venture with private equity group Kohlberg Kravis Roberts, in 2006.

Seven also has been busy making media investments, including a stake of up to 14.9 per cent in regional broadcaster Prime Media Group and increasing its stake in West Australian Newspaper Holdings to 23.2 per cent.

Gilmour considered two hypothetical funding structures that might result ultimately in Seven controlling Fairfax.

He estimated Seven would pay A$1.50 per Fairfax share without any debt funding or help from private equity partners.

Assuming private equity control and Seven not retaining any cash, Gilmour estimated Seven would pay A$1.85 per Fairfax share.

Fairfax was up 7c to A$1.13, and Seven also gained 7c to A$6.04 yesterday.

- AAP