Hellman and Friedman is a global firm, founded in San Francisco in 1984 with operations in San Francisco, New York and London. H&F acquired the consumer marketing company Catalina in 2007.
It's equates to more than the $1.20 per share proposed by TPG Capital and Ontario Teachers' Pension Plan Board.
Now, H&F's bid is for 100 percent of Fairfax, and is valued at $2.87 billion, or between $1.225 to $1.250 per share.
Earlier in the day, the committee heard from Paul Murphy, chief executive of the Media, Entertainment and Arts Alliance, who raised concerns about the impact of splitting Domain off from the rest of the Fairfax business and listing it on the ASX.
A TPG spokesman said the private equity group welcomed the board's decision to grant due diligence.
Fairfax will now open its books to both parties for due diligence, to see whether an "acceptable binding transaction can be agreed" for the whole company. "We also have a very serious concern, which we believe is something that needs to be kept in the public spotlight very strongly, that these types of private equity firms have a track record of taking cash out of businesses and not leaving cash to fund employee entitlements". Today in the United States, the Federal Communications Commission voted to begin the process of rolling back existing media regulation rules which may lead to a free-for-all in the media mergers and acquisitions area.
Hellman & Friedman, which offered a prospective bid of between $1.225 and $1.25 a share was no stranger to Fairfax: it was part of Tourang - a consortium of investors including Canadian media baron Conrad Black and the late Kerry Packer, which bought Fairfax out of receivership in 1992. The proposal assumes no dividends are paid by Fairfax from the date of the proposal to completion (H&F Indicative Proposal).
Fairfax shares are up more than 6% and are trading at a six-year high of $1.23 a share.
Since the board became aware of TPG's interest in Fairfax, it had been actively canvassing other potential bidders - among them Hellman & Friedman.
The proposals remain subject to conditions including the successful completion of due diligence and foreign investment approvals.
TPG revised its offer to Fairfax after its initial proposal to break up the company and only acquire Domain and Fairfax's three flagship mastheads received a tepid reception from shareholders, who said it greatly undervalued the company.
During the due diligence period Fairfax intends to continue progressing the announced potential separation of Domain Group.
Fairfax shareholders do not need to take any action in response to the Indicative Proposals and the Fairfax Board will update shareholders as appropriate.