Fairfax Media has confirmed it has received an unsolicited approach from a consortium led by private equity company TPG capital.
Fairfax chief executive Greg Hywood wrote to staff on Sunday evening confirming the "preliminary indicative" proposal and pointing out it was still subject to a number of conditions including approval by the Foreign Investment Review Board (FIRB).
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Mr Hywood said TPG's proposal would see it acquire Domain, Australian Metro Media (including the Sydney Morning Herald, The Age and the Australian Financial Review) as well as the company's events and digital ventures.
The deal's proposed structure would mean shareholders would receive cash for the assets TPG bought and scrip for the company holding Fairfax's New Zealand business, its regional and community newspapers, radio assets and 50 per cent share of online streaming network Stan.
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Mr Hywood and other senior staff were locked in urgent meetings at the company's Pyrmont headquarters on Sunday.
"Appropriately, the Fairfax board is reviewing the indicative proposal," he said.
"There is no certainty that the indicative proposal will result in an offer for Fairfax, what the terms of any offer would be, or whether there will be a recommendation by the Fairfax board.
"There is also no certainty that the indicative proposal is capable of being implemented given the complexity involved in splitting the businesses."
Domain plus the three mastheads would be worth about $2.5 billion according to an Australian Financial Review report.
TPG bought just under 5 per cent of Fairfax Media in March sparking speculation about its plans for the company.
Fairfax Media announced in February that it was looking into spinning off Domain into a separate listed vehicle to address perceptions that its value was unrealised as part of the broader group.
Fairfax is in the middle of a controversial editorial cost-cutting program at its metropolitan mastheads as it seeks $30 million in savings. Editorial staff went on a week-long strike starting last Wednesday.
On Friday, major international investment fund Blackrock revealed it had substantially lifted its stake in Fairfax Media. It has lifted its holding from 33.7 million shares to 115 million shares, giving it more than 5 per cent of the company.
A day earlier, Mr Hywood told an investor conference that the Domain review was "well under way" following the appointment of Grant Samuel and was expected to be completed later this year.
Domain was enjoying price increases for listings and audience growth, he said.
"Over the past two years, total mobile visits were up 133 per cent, total app visits up 107 per cent and app downloads grew 60 per cent," he said.
Mr Hywood told the same conference that the publishing business was facing structural challenges and that Fairfax had cut net publishing costs by $400 million over the past five years.
"Through this entire transition our publishing businesses have remained profitable," he said.
The federal government over the weekend announced reform of the country's tight media ownership laws prompting predictions that the sector would see a flurry of corporate activity.
In particular the government is looking to do away with the "two-out-three" rule, which prevents single ownership of TV, radio and newspapers in the same capital city market.
Following Thursday's update Deutsche Bank analyst Entcho Raykovski predicted the company would produce after tax profits of $142 million this financial year compared to $143.2 million before Mr Hywood's presentation.
That number would fall to $135.6 million next year before bouncing back to $142.1 million in the 2019 financial year.
Mr Raykovski has a 12 month price target on Fairfax of 90 cents.
Fairfax's shares were trading at $1.06 at the market close on Friday.