Takeover offer for Trade Me
Trade Me has received a takeover offer from British private equity company Apax Partners to acquire 100 per cent of its shares in Trade Me at a cash price of $6.40 each.
The preliminary and non-binding proposal is subject to a number of conditions, including the completion of due diligence.
Trade Me’s board of directors and its advisers has reviewed the indicative proposal and has opted to engage with Apax. It has provided Apax with due-diligence access on an exclusive basis until December 12 to facilitate a binding offer. This exclusive access is subject to a “fiduciary carve-out” that permits Trade Me to engage with third parties should it receive any unsolicited proposals.
The board of Trade Me notes that there’s no certainty the indicative proposal will result in an offer or any other transaction for Trade Me.
In a statement to the NZX made on November 21, the company says: “The Trade Me board will update the market on any material developments. It advises shareholders they do not need to take any action in relation to the indicative proposal, and they should not do so without assessing all available information and seeking their own professional advice. Trade Me is being advised by Goldman Sachs.”
Trade Me’s shares jumped by 18 per cent, or 96 by cents, to $6.06 immediately after the offer was revealed to the NZX, which is the highest they have ever traded at. The offer would value Trade Me, which employs about 600 staff, at $2.5 billion – about $500 million more than its share-market value when trading closed on November 20.
In a nutshell, Apax Partners is offering to buy the entire business for a cash payment, but the offer is subject to a number of conditions, including the completion of due diligence, Trade Me says.
Founded by Wellingtonian Sam Morgan and previously owned by Fairfax Media, which also owns Stuff, Trade Me was initially floated on the NZX after raising $363.5m at $2.70 a share.
The company’s current chief executive officer, Jon Macdonald, announced in June he would step down at about the end of the year and a replacement hasn’t yet been named.
Apax Partners describes itself as “an independent global partnership” focused solely on long-term investment in growth companies. Funds advised by the company typically invest in technology, telcos, services, healthcare and consumer businesses with an enterprise value of between €1billion (or about NZ$1.67b) and €5b. This puts Trade Me well-within its sweet spot. Its portfolio companies employ more than 150,000 people in businesses that at the end of 2016 generated combined revenues of more than US$21b, or about NZ$31b.
Offer is a ‘pretty decent premium'
Grant Davies, an investment adviser at wealth-management firm Hamilton Hindin Greene in Christchurch, describes the offer as a significant premium to Trade Me’s recent share price, and will likely to be supported by shareholders.
“It’s a pretty decent premium,” he comments. “It’s a premium to the analyst target prices and to what it has ever traded at.
Trade Me has moved out of the strong growth phase of its early years and was now more of a “cash cow”, Davies told Stuff.
“New Zealand investors have been pretty happy to take the quick buck in the past, and with Trade Me not exactly in the high-growth category any more, it's likely to go through subject to conditions, which we don’t have details on yet.”
