Another Trade Me bidder looms

Trade Me users are well aware a bidding war can drive a price through the roof — now that could be about to happen for the company itself.

On November 22, Trade Me’s board revealed it had an offer on the table from UK outfit Apax Partners.

Now US private equity player Hellman & Friedman is said to be actively considering a bid.

Hellman has previously invested in similar companies, and has recently raised a US$15 billion fund. Its dealmakers are said to have been recently in NZ.

Analysts were split after Apax placed its preliminary bid of $6.40 a share for Trade Me, valuing the ASX/ NZX-listed company at $2.54b.

Craigs Investment Partners deputy head of institutional research Stephen Ridgewell said $6.40 represented a high offer — 25 per cent above Trade Me’s pre-offer close, and a 26 per cent premium on the company’s average post IPO forward price/earnings ratio.

But Devon Funds Management chief investment officer Mark Brown said he saw room for some sweetening, given Trade Me’s market power as an incumbent and because it’s attractive as “enormously cash generative and has very little debt”.

And he says that beyond the potential bidding war between rival private equity players Apax and Hellman, it’s possible that a trade buyer like China’s Alibaba could place a bid.

The Chinese giant “has bought players in other parts of the world rather than start from scratch. You could see someone in the industry making that play,” he says.

Trade Me investors have not been entirely convinced.

Shares have jumped from $5.10 to a recent $6.09 since the Apax bid was made public, but are still shy of its $6.40 indicative offer (Apax is currently carrying out due diligence and won’t make its final, binding offer until December 12).

Brown doesn’t want to speculate how high bidding for Trade Me could go, but thinks it will be a good result for shareholders — if not so much for the NZX or the country.