TradeMe IPO

[johndeyell]

Who wants a slice of this pie??

Speculation is growing that media company Fairfax is looking to list Trade Me on the sharemarket or possibly sell it.
Fairfax, which is based in Australia, has confirmed today it is looking at a range of options for the online site and media speculation is that this may include a dual listing on New Zealand and Australia's stock exchanges.
The media company has confirmed it will sell some of its Australian radio stations.
Market analyst Brad Gordon, of Macquarie Private Wealth, told TVNZ today that a partial float of Trade Me will be popular wit Kiwi investors and the local exchange.
"I think a listing would be very very well-received by the market for this sort of sector.
"From a Fairfax point of view it would also be well received. Fairfax has under-performed the market considerably in the last t years and this may be some way of realising value," he said.
Gordon says IPOs for online companies like Groupon and LinkedIn are causing a "massive furore" in America and the trend could continue here.
Fairfax - which owns the Stuff website and the Dominion Post, Press and Sunday Star-Times newspapers in New Zealand - bought Trade Me for $700 million in 2006 from founder Sam Morgan.
At the time, Fairfax described Trade Me as: "A standalone, highly dynamic business on its own high growth trajectory (and) w established plans for future expansion".
The deal was much-maligned at the time, but analysts have since changed their tune, valuing the auction site at between $1 billion and $1.5 billion.
The online auction site is consistently among New Zealand's most popular websites and has 2.5 million registered users who l 5.5 million auctions per month.
Fairfax's shares fell 1.5% to 99 Australian cents on the ASX yesterday, and have dropped 28% this year.

-TVNZ.CO.NZ

[elZorro]

Good idea for a thread JD. Trademe's traffic is amazing, many a small business relies on google hits from here, and sales on the site. A great way to start a business, just trying sales on Trademe. I would buy their shares no problem. Of couse they'd need to divulge the books, so an outright sale is also possible, if they can find someone with deep pockets.

[arcticblue]

Why would fairfax sell Trademe if it's such a good business? If it's making lots of money then it seems silly to get rid of it. On the other hand if they think they've made a good capital gain then why not hock it off for a premium while there are still buyers around.

[Billy Boy]

Why would fairfax sell Trademe if it's such a good business? If it's making lots of money then it seems silly to get rid of it. On the other hand if they think they've made a good capital gain then why not hock it off for a premium while there are still buyers around.

Very good Q.
Maybe fairfax need the $$$
Maybe Trademe slipping as a sight.
Maybe fairfax could do better with the money.
Others hopfully will come up with more "maybe's"
BB

[janner]

articblue.

More intested in your comment " while there are still buyers around " .

Are you having premonitions ???.

Or do you know something ??..

[CJ]

Very good Q.
Maybe fairfax need the $$$
Maybe Trademe slipping as a sight.
Maybe fairfax could do better with the money.
Others hopfully will come up with more "maybe's"
BB

Maybe they think the spectalar growth is over (ie. is a mature business) and therefore selling on a normal multiple is worth it. They already cover 60%+ of people in NZ so growth is limited and it cant expand into other countries as eBay is the leader (there can be only one per market)
Maybe they think they can get in on the current tech bubble and get a high mulitple

[macduffy]

There have been reports that some Fairfax shareholders have been agitating for the sale of TradeMe to release capital for either a return to shareholders or a buyback. The argument goes that TM's value isn't being properly reflected in the Fairfax SP but I agree, it doesn't seem a great idea to sell off your best asset when the total business is struggling.

It will be interesting to see how it pans out if they decide to sell via a public issue. Much comment at present that the new issue market is dead but I wonder how much of that is due to the modern method of virtually requiring subscribers to commit to an issue without knowing what the final price will be and often with only a very short time to read and digest a wordy prospectus. No wonder retail investors are a bit gun-shy of such issues!

[macduffy]

Stephen Bartholomeusz' take on the possible Fairfax/TradeMe future:

Fairfax Media’s confirmation this week that its strategic review of its assets includes a potential sale or partial float of its Trade Me digital auctions business in New Zealand raises the obvious question. Why would the struggling old world media group consider selling its best and biggest new media world asset?

There are actually some good reasons as to why Fairfax’s new chief executive, Greg Hywood, would contemplate monetising at least some of the group’s investment in that business.

Fairfax has initiated a sales process for its radio assets, albeit one that might not necessarily lead to their sale, that is expected to raise $250 million-plus. A Goldman Sachs analysis of Fairfax this week indicates a value for Trade Me, at the upper end of its range of values, of about $900 million.

With about $1.3 billion of net debt, the sale of the radio assets and some or all of Trade Me cashed out, Fairfax would be very conservatively geared and in a position to withstand whatever the structural and cyclical forces now battering its traditional businesses will throw at it.

Trade Me is, however, arguably the group’s best asset. It generated nearly two-thirds of the earnings before interest, tax, depreciation and amortisation of Fairfax’s digital division in the first half. Selling it would gut that division and could undermine whatever premium the market attributes to the group’s digital business.

The business, however, is purely a New Zealand one and, despite its success, the model can’t be exported across the Tasman or somehow leveraged into the larger Fairfax digital landscape. Trade Me was able to establish itself, and fight off, the eBay tide that overwhelmed similar auction businesses elsewhere, including one Fairfax itself had established in Australia.

Thus, while its performance and prospects might be impressive, they are limited to a relatively small economy and can’t be connected or leveraged to generate benefit to the wider group.

That could be an argument for a simple sale. A financial or trade buyer would presumably be prepared to capitalise some of Trade Me’s prospects in their purchase price.

A sale of the entire business, however, would generate far more cash than Fairfax needs. It would be substantially under-geared, although it could remedy that (and perhaps do something about its sagging share price) by buying back some of its shares.

The half-way point, if Fairfax believed the real value of Trade Me wasn’t fully reflected in its share price, would be to spin Trade Me out as a separate listed vehicle but retain majority control. Goldman Sachs suggested a sell down of about 35 per cent to raise about $300 million.

Under that option the market would be able to value Trade Me discretely and that market valuation would, in theory, be built into valuations of Fairfax but Fairfax would still be able to include its share of Trade Me’s earnings within its own.

Combined with the sale of the radio network, Fairfax would have more than $500 million to play with.

It could use that to pay down debt but the more interesting option for deploying most of the capital and cash released would be to invest it in other digital transaction businesses.

Hywood has outlined his strategy for trying to save Fairfax’s ailing metropolitan mastheads by using their presence online to create audiences for the group’s digital transaction businesses. To make that strategy work, or at least to give it a chance of succeeding, he needs to build or buy (or both) a lot more digital transaction businesses.

Selling assets that contribute little if anything to the group’s core newspaper and online mastheads to invest in businesses that can leverage off them makes more sense than having big lumps of capital tied up in standalone and unrelated assets, although it could be argued that the radio network could be better integrated with the newspapers assets.

In any event, a partial spin out of Trade Me does have some logic and appeal to it, both to reduce the risk within the group at a time when its core revenues and earnings are under pressure and to create the funding for the expansion that Hywood’s strategy dictates.

[nwood]

Stuff.co.nz : Fairfax Media selling off up to 35 per cent of its stake in Trade Me ... More soon

[nwood]

SYDNEY, 26 August, 2011: Fairfax Media Limited [ASX: FXJ] has commenced preparation
for an Initial Public Offering (‘IPO’) of Trade Me - New Zealand’s largest online auctions and
classifieds business.
The decision to pursue an IPO of Trade Me is a further initiative arising from the recent
strategic review of Fairfax Media’s portfolio of assets. Fairfax intends to sell between 30%
and 35% of Trade Me through the IPO and anticipates the proceeds from any IPO will be
applied to reduce debt and provide the flexibility to increase dividends. Trade Me will be
listed on the New Zealand Exchange with consideration to be given to a potential ASX
listing."
Greg Hywood, CEO and Managing Director of Fairfax, said "The decision to pursue the IPO
of Trade Me is a further step in reshaping the Fairfax portfolio and adopting a more flexible
corporate structure to maximise shareholder value. Importantly, Fairfax will continue to
benefit from the strong growth profile of Trade Me through a shareholding of at least 65%.
“The resultant corporate structure supporting Fairfax’s multi-platform strategy will retain
portfolio benefits, whilst unlocking value for Trade Me and Fairfax shareholders.
“Trade Me is New Zealand’s largest auctions and classifieds business and its growth within
the Fairfax portfolio has been dramatic - driven by its community of 2.8 million New Zealand
members. The company is now of sufficient scale to operate as a standalone, separately
listed company and we believe it will benefit from the increased public profile, independent
access to capital, and opportunity for direct investment by New Zealand investors.”
David Kirk has agreed to be the non-executive Chairman of Trade Me and UBS has been
appointed as Sole Lead Manager in relation to the IPO. The timing of the IPO has not been
finalised and will depend on appropriate market conditions. Further details of the IPO will
be announced in due course.