On Friday Fairfax announced plans to sell via an Initial Public Offering (on the NZX) between 30 to 35% of Trade Me – New Zealands largest online auctions and classifieds business. Fairfax is yet to indicate the proposed time for the float but said the funds are to be used to repay debt and increase dividends.
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%.
Former Fairfax chief David Kirk, who made the decision to buy the auction site in 2006 for some $700 million, will be brought back in as non-executive chairman of Trade Me.
There’s no doubt Trade Me is an excellent company as it has over 2.7 million registered traders and is said to contribute to around 17% of Fairfax’s online earnings. However, many spectators believe Fairfax paid too much for Trade Me so a successful IPO will clarify whether their investment was a success.
I don’t see this IPO having a direct affect on the Australian real estate industry but it should be positive for the New Zealand market as now buyers, sellers and agents can become owners in the portal they all use and enjoy.
7 Comments
Martin Crampton
This mindset might affect real estate agents at some time. Just as Fairfax has resisted (internal and ezternal) pressure to spin this off for ages as they try to shore-up their digital offerings, so they have also resisted IPO’ing Domain. Now they just can’t deny the cash of such action as their online businesses have better margins than print but lower revenues. Simon B might hazard a guess at the IPO value of Domain if REA is (still) worth around $800 million. More independence for Domain from Fairfax might then affect real estate agents, Ryan.
Ryan O'Grady
Martin, I don’t think Fairfax would ever offload any of their major Australian online brands, as they’re needed to keep the advertising revenue coming in. Combined, these brands provide users with a one-stop shop for all their online needs I think diluting them would reduce Fairfax’s point of difference.
Martin
It’s funny what staring a load of $money in the eye might do to a company’s shareholders that’re looking at taking many years to achieve the same cash return, Ryan 🙂
Business Trader
$700 million….wow! It would be hard to knock back a figure like that if Fairfax made me an offer for http://www.Business-Trader.com.au. Seeing as though I am their number one competitor, you never know. Fingers crossed! (I think I’ll keep dreaming!)
Martin Crampton
Watch this space. It seems Fairfax can’t sell its radio stations so they’ll be looking for $ from somewhere else (in addition to the Trademe sale). How much of REA does News Ltd own? Keeping 50 – 70% of a Domain IPO is still going to free-up hundreds of $millions for the balance sheet. Simon B?
Martin Crampton
How slowly do these media Titanics take to throw-out the lifeboats! It’s 1/2 yrs since I raised this & M & A boys and girls have been taking their pay for doing what over that period?!
“This has raised expectations that Domain will be spun into a separately listed vehicle, with Fairfax retaining a controlling stake. This should unlock the true value of the strongly growing Domain business.
Read more: http://www.theage.com.au/business/fairfax-shareholders-keen-for-news-on-domain-and-paywalls-20130522-2k16p.html#ixzz2U7PZdaT4
Martin Crampton
That was of course, 1 1/2 years ago when Trademe was offloaded!