Trade Me shares soar after UK bid
British private equity company Apax Partners has launched a takeover offer for Trade Me, with an offer price of $6.40 a share.
Shares in the internet auction company leapt 20 per cent, or 97 cents, to $6.07 after the offer was revealed to the New Zealand stock exchange. It is the highest Trade Me’s shares have ever traded at.
The offer would value Trade Me, which employs about 600 staff members, at $2.5 billion – about $500 million more than its sharemarket value when trading closed on Tuesday.
Trade Me described the offer as ‘‘a preliminary, non-binding, indicative proposal’’. But analysts saw few obstacles to the deal assuming it was finalised and Apax was not outbid.
The offer is a premium of about 25 per cent to Trade Me’s share price on Tuesday evening, before the offer become public.
Apax Partners was offering to buy the entire business for a cash payment, but the offer was subject to a number of conditions, including the completion of due diligence, Trade Me said.
Apax has investments in the technology and telecommunications industries, including French telco Orange, as well as services, healthcare, and consumer investments. The company is an investor in UK vehicle classifieds business Auto Trader.
Trade Me’s board has allowed Apax exclusive access to its books until December 12, so it can firm up a binding offer. However, it is allowed to engage with other parties if it was to receive another offer. Trade Me is being advised by Goldman Sachs.
In its NZX statement, Trade Me said it would update the market on material developments.
The company’s current chief executive, Jon Macdonald, said in June that he would step down at the end of the year, and a replacement has not yet been named.
Founded by Wellingtonian Sam Morgan, and previously owned by Fairfax Media, Trade Me was initially floated on the NZX after raising $363m at $2.70 per share.
Grant Davies, an investment adviser at wealth management firm Hamilton Hindin Greene, said the offer, which was a significant premium to Trade Me’s recent share price, was likely to be supported by shareholders.
‘‘It’s a pretty decent premium. It’s a premium to the analyst target prices; it’s a premium to what it has ever traded at,’’ he said.
Trade Me had moved out of the strong growth phase of its early years and was now more of a ‘‘cash cow’’, Davies said.
‘‘With Trade Me not exactly in the high growth category any more, it’s probably likely to go through, subject to the conditions of the offer, of course.’’
While the offer was ‘‘not exactly a done deal’’, Davies said Apax was likely to be serious about making an offer.
‘‘They’re not playing silly buggers, that’s for sure.’’
Trade Me’s share price closed at $5.93 yesterday, an increase of 16.3 per cent on the previous day’s sharemarket close.