Yanks, Brits eyeing up Trade Me
US private equity player Hellman & Friedman has bid $6.45 a share for Trade Me, valuing the ASX/NZXlisted company at $2.56 billion.
Trade Me shares jumped 2.81 per cent to a new all-time high of $6.22 on the back of the news.
The Hellman bid trumps an earlier $6.40 a share ($2.54b) offer from British PE outfit Apax Partners, revealed on November 22.
Neither offer is binding at this point. Both are subject to due diligence. Apax is set to make a binding offer on December 12.
As with the Apax offer, Trade Me’s board has given itself legal wiggle room to field other bids as it mulls Hellman’s alternative non-binding offer.
Hellman has previously invested in similar companies, and has recently raised a US$15b fund. Its dealmakers are said to have been recently in NZ. China’s Alibaba could be next to bid.
Craigs Investment Partners deputy head of institutional research Stephen Ridgewell describes Hellman’s $6.45 bid as a “tepid” increase on Apax’s offer.
“The scope for further significant re-raises by private equity bidders may be limited, with the best scope for a significantly increased offer being from a potential trade buyer,” he says.
Earlier, Ridgewell noted the Apax offer was 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 he added: “We see potential for a competing bid to emerge, including potentially from cashedup trade buyers who could add value to Trade Me’s platform,” he said.
As the Apax offer came in, Devon Funds Management chief investment officer Mark Brown also 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 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 shares have surged to an all-time high on the back of the bidding war.
Trade Me investors are still not 100 per cent convinced a deal will go through. Shares have jumped from $5.10 to yesterday’s $6.22 since the Apax bid was made public, but are still shy of its $6.40 indicative offer or Hellman’s $6.45.
Ridgewell says with a second offer now on the table, a deal is more likely, so he expects the shares to narrow their discount.