The Australian boss of TPG Capital has been forced to defend private equity firms' "barbarians at the gate" reputation in an effort to secure support for his $2.87 billion proposed takeover of Fairfax Media.
The TPG consortium, led by the private equity group's Australian boss Joel Thickins, has a $1.20 per share proposal on the table to take over Fairfax while another US private equity group Hellman & Friedman, has offered a counter bid at between $1.225 and $1.25.
Mr Thickins, who began at the firm in October last year, was grilled on Friday afternoon by the Senate Committee on the Future of Public Interest Journalism that focused on a $678 million tax dispute in which proceeds from the 2009 sale of Myer shares were transferred offshore "which didn't fill us with confidence", the committee said.
Labor Senator Sam Dastyari said he had received a call from a US Congressman overnight who "thought it was astounding" Fairfax could be sold to TPG given the son-in-law of the Russian Foreign Minister previously worked for the private equity firm.
"The real worry is that private equity firm X moves in. You take a company like Fairfax, you rip apart and flog it off and public interest and journalism is damaged. If you want to do that with real estate that's private business as far as I'm concerned," Senator Dastyari said.
"My real worry is you will take over and then the week after we see the Illawarra Mercury or Newcastle Herald shut down ... and Fairfax will increasingly become click bait to draw people to Domain."
Committed to growth
Mr Thickins said he couldn't give any guarantees on journalist jobs before he had conducted due diligence but TPG was committed to growing the business and batted off concerns Fairfax websites would be reduced to click-bait and cat videos.
"It's very, very difficult to comment without being across the detail of the business," he said. "What I can say is you need talented journalists to produce high quality content.
"These are highly desirable mastheads that consumers are visiting everyday, every week This is not something to be pushed to the side. Nobody is forcing us to make this approach."
Mr Thickins' appearance at the committee is an unusual step for a private equity firm.
"This not a pleasant experience but we take this seriously," he said.
Mr Thickins said high quality journalism was the anchor of his approach to audience reach.
"You need talented journalists to produce high quality content. Audience reach and the consumption of content is the key here.
"High quality content has never been in more demand ... how people are accessing that content is what is changing ... so it's a moving feast, the important point is the mastheads have a future and content has a future."
Better together
He also reaffirmed TPG's belief that Domain and the metropolitan mastheads are better together.
"I think they support one another. We made a $575 million increased bid – that increased bid would be illogical if we didn't think they had a long-term future. The ambition is to build and grow these businesses."
However, TPG could potentially sell Fairfax Media in four to five years time, with Mr Thickins noting every situation is different, but a "rule of thumb is four to five years" for private equity holding on to a business.
There was no commitment Fairfax would be sold in that timeline under TPG ownership, as it would depend on whether the US-based private equity firm believed it had got the best return it could achieve. For example, TPG bought RentPath in 2011 and still owns it.
South Australia Senator Nick Xenophon asked Mr Thickins five times whether he had met with Domain CEO Antony Catalano, which Mr Thickins repeatedly refused to answer. Mr Thickins responded by saying his approach to Fairfax was through chairman Nick Falloon, but he would not answer direct questions about whether he had met with Mr Catalano. The committee indicated it would now call Mr Catalano to appear.
Questioned on what TPG's top price would be, Mr Thickins responded in a light manner: "There's not a chance I'm going to share that information with a competitor."
Sticking to charter
Mr Thickins committed TPG to Fairfax Media's charter of editorial independence.
"If the consortium does acquire Fairfax, neither I nor any other member of the consortium wishes to become a newspaper editor," he said.
"That is a skill set I do not possess, and I think I can add greater value by focusing on what I am good at, which is investing in companies and creating long-term commercial value and financial health. I am happy to state that if TPG is successful in acquiring Fairfax, we would commit to maintaining its charter of editorial independence."
The committee has indicated it will ask the new and highest bidder Hellman & Friedman to give evidence.
A source close to Hellman & Friedman said if and when an invitation was made, it is something that will be considered at the time.
