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Trade Me attracts another suitor with a sweeter offer

Trade Me has attracted a second private equity suitor willing to pay $2.56 billion for the country’s dominant online marketplace.

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by Paul McBeth

The Wellington-based company said yesterday it has received a non-binding indicative offer from Hellman & Friedman at $6.45 a share, trumping an earlier indicative bid from UK private equity firm Apax Partners at $6.40 a share, or $2.54 billion.

Apax is doing due diligence on the New Zealand business, but Trade Me is allowed to engage with parties lobbing in unsolicited bids. The Kiwi firm’s board has decided it will also engage with Hellman & Friedman on the new bid, which is subject to certain conditions and completing due diligence.

“The board has decided that it is in the interests of Trade Me and consistent with its fiduciary obligations to also engage with Hellman & Friedman on the new proposal,” it said. “The board notes that there is no certainty either proposal will result in an offer, or any other transaction, for Trade Me.”

Trade Me was trading at $5.10 before the Apax bid was made public on Nov. 21, and gained 1.8 percent to $6.16 today.

The company’s small debt load has been cited as an attraction for potential private equity buyers, who typically leverage up their target companies. Trade Me’s strong brand and network are also seen as giving it a sustainable advantage to rivals breaking into the local market.

When the Apax offer emerged, Morningstar Research gave it a 50/50 chance of success, given the early stage of the negotiations and that due diligence was a high hurdle to cross. It put a $5.70 fair value on Trade Me’s stock because of the premium.

Hellman & Friedman is a US private equity fund manager which focuses on large-scale equity deals in select sectors. Last year it was one of several bidders for Australian publisher Fairfax Media Group and its online real estate listings unit Domain. Fairfax is a former owner of Trade Me.