Fairfax considers Trade Me sale
The company that owns auction site Trade Me has confirmed it is conducting a strategic review of the business, amid suggestions it may be sold.
Fairfax Media's general manager for investor relations, Frank Sufferini, told Radio New Zealand that Trade Me was being reviewed alongside other parts of the trans-Tasman firm's business.
The move follows an announcement that Fairfax will sell some of its radio stations in Australia in a move designed to ''repay debt and increase financial flexibility''.
Fairfax said any in that announcement that ''any strategic initiatives will be considered in the context of maximising shareholder value''.
Other elements of the company's strategic review include 82 redundancies from Australian mastheads which, along with other changes, would cut costs by an estimated A$15 million per year.
Fairfax shares yesterday closed below the A$1 mark for the first time since the global financial crisis, dipping 30 cents since the start of May.
Australian media have suggested Trade Me will be sold, or it may consider a partial share float.
Forsyth Barr's New Zealand head of research Rob Mercer said he would welcome a Trade Me listing on the local stock exchange, although he encouraged Fairfax's board to take a long-term look at its assets.
"With Trade Me, Fairfax has got a much stronger presence in the new era of technology in a period where print media is in decline.
"While Trade Me might be worth more as a stand-alone business, it does provide [Fairfax] with a strategic position to evolve its business to where the future lies, rather than carving Trade Me off and trying to extract higher value for that part and then getting back to core business."
Analysts have valued Trade Me at $1.3 billion to $2 billion. It has 2.7 million registered traders and employs 190 staff in New Zealand.
A report released by Australian analyst Fraser McLeish of Royal Bank of Scotland in April ramped up speculation that TradeMe might be at least partially floated to offset investor angst with an underperforming share price.
McLeish then told BusinessDay that shares in the Trade Me, which is a household name in New Zealand, would "fly off the shelves".
Since Fairfax bought Trade Me for $700 million in 2006, under the leadership of former Fairfax chief and World Cup-winning All Black David Kirk, it has been the trans-Tasman company's star performer.
While the company does not split out TradeMe specifically, the auction site makes up the majority of the 17 per cent of earnings contributed by the "online" sector to the Fairfax pie.
In its last full year results to June 2010, Trade Me increased its revenue 15 per cent and earnings 16 per cent, underpinning a 22 per cent rise in the Fairfax Digital segment's earnings to A$111m.
Meanwhile Fairfax's underlying total revenue was down 2 per cent to A$2.48 billion as the publishing industry emerged from one of the largest advertising downturns in memory.
Fairfax's market value is around A$2.3 billion ($3b).
Fairfax's confidence in the Trade Me business and the expertise in its ranks was illustrated by the elevation of its founder, Sam Morgan, to the Fairfax board.
The company also has a new chief executive in Greg Hywood.
Mercer said he thought it would be prudent for Fairfax's directors to listen to core investors concerns, but they should also be clear in their vision for the future of the business.
Fairfax Media is the publisher of the Stuff website and New Zealand newspapers including The Dominion Post and The Press.