'Time is right' for Trade Me sale
Fairfax Media’s reported sale of the company’s remaining stake in Trade Me has come at a good time and will help the company reduce debt, analysts say.
Media reports over the weekend said Fairfax had engaged investment bank UBS to offload its 51 per cent stake — or about 202 million shares — in Trade Me for about $3.05 a share through an institutional placement.
Trade Me, which was listed on both sides of the Tasman, closed Australian trading on Friday at $3.22.
The sale would raise about $616 million and follow Fairfax’s decision in November to offload its specialist agricultural media business in the US for $US79.9 million ($A76.24 million).
Independent media commentator Peter Cox said while Trade Me had a big market share in New Zealand its rate of growth was slowing in a maturing market.
''Even though I would agree that you are looking for businesses for the future that are internet based where there can be high rates of growth, I would suggest that this one has probably seen its best days now,’’ Mr Cox said on Sunday.
''Therefore if they can get what they feel to be a very good price for it then definitely they should consider selling it.’’
Cox ran unsuccessfully for a seat on the Fairfax board at November’s annual general meeting.
Mining magnate Gina Rinehart has also backed the sale. Rinehart, whose stake in Fairfax is 14.99 per cent, has been lobbying the Fairfax board to sell assets to pay down debt, according to her chief financial officer's comment to the Australian Financial Review.
Fairfax bought Trade Me for $NZ700 million ($A566.25 million) in 2006 and floated 34 per cent of the company in December 2011 through an initial public offering which raised $NZ363 million ($A293.64 million).
It sold a further 15 per cent in June 2012 for $NZ206 million .
Fairfax’s full-year accounts said Trade Me had a ‘‘somewhat variable performance’’ over the second half of 2011/12.
The mooted sale would give Fairfax the opportunity to bolster its balance sheet — the company’s net debt stood at $914 million at June 30, 2012.
Cox said $650 million from the Trade Me sale would ‘‘put a nice dent in the debt at Fairfax’’.
''It also puts them in the position where if there came an opportunity for what they considered to be a good investment, they would have the funding ability from which to invest in something,’’ Cox said.
In Australia, Ten (twice) and Seven West Media have both gone to the market to raise fresh capital in a bid to shore up battered balance sheets in 2012.
‘‘If you have a lot of debt on your balance sheet, you are bit handcuffed because you can’t move very quickly, you can’t take opportunities,’’ Wealth Within analyst Dale Gillham said on Sunday.‘
‘In the last few years analysts have been looking down at companies with higher debt levels and so therefore reducing debt is what they like to see.’’
In 2012, Fairfax announced 1,900 job cuts, closure of printing presses in Sydney and Melbourne and the creation of online paywalls in Australia only in a bid to deal with the structural shifts in the media industry.
A Fairfax Media spokesman said on Sunday the company had no comment.