The decision to sell its remaining 51% stake in New Zealand
online auction site Trade Me was a sad indictment on the
state of Australian publisher Fairfax Media, Craigs
Investment Partners broker Chris Timms said yesterday.
Shares in Trade Me have been halted to let a bookbuild take
place for the sale of Fairfax's shares, Trade Me said,
without disclosing a price. Broker reports have put the sale
price at $A3.05 ($NZ3.81) a share, a 5.3% discount to the
$A3.22 closing price on the ASX. The dual-listed shares
closed at $NZ4.05 in New Zealand on Friday.
The sale is seen as a move to pay down Fairfax's mounting
debt as it overhauls its business away from printing presses
and into the digital world, and is part of a shift away from
indebtedness after Rupert Murdoch said the publishing arm of
his media empire would be debt-free after the News Corp
''They think the sale had more to offer by making them
debt-free than future opportunities and the substantial cash
flows Trade Me offers,'' Mr Timms said.
Craigs expected there to be strong demand for the balance of
the shares. Institutions would look to add to their existing
While some brokers had rated the sale of Trade Me as
generating the same sort of interest as the recent float of
Fonterra units, Mr Timms said the two sales could not be more
different. Trade Me was a dominant player in a small market
and Fonterra was a global company.
The sale would be positive for Trade Me, as the removal of
Fairfax as a cornerstone shareholder would take away any
uncertainty about the auction site's future.
However, Mr Timms questioned the decision for the sale when
Fairfax had maintained it was moving to increase its online
''Reducing debt could be the only way Fairfax could do
that,'' he said.
Trade Me stock is rated an average ''hold'' based on eight
analyst recommendations compiled by Reuters, with a median
target price of $4.10.
At that price, Fairfax would reap about $A616 million from
the sale, or $NZ768.3 million in New Zealand-dollar terms at
yesterday's cross-rate of A80.18c per NZ dollar.
Forsyth Barr broker Tom Bliss said Trade Me performed well
since listing, delivering better-than-forecast earnings.
''We believe Trade Me has a positive medium-term outlook and
could deliver solid growth across its various divisions.''
Trade Me was leveraging growth through three key areas, he
said. They were:
• New sales - Trade Me had partnered with Channel Advisors
and was expanding relationships with other participants such
as Hallenstein Glassons, The Warehouse and new international
• Mobile auction trading - increasing use of trading via
smart devices, expanding trading opportunities.
• Pay Now - Trade Me's secured payment system which had moved
into profitability and had substantial upside if the company
could replicate eBay's PayPal success.
Forsyth Barr had a 12-month target price on Trade Me of
$4.10. The current hold recommendation was based on Trade
Me's share price previously being above $4, Mr Bliss said.
The latest tranche of Fairfax's exit will mean the media
group will have pulled out about $1.5 billion since last
year's partial float and subsequent sell-down and also
through saddling Trade Me with $166 million debt. That does
not include the $220 million dividend Fairfax extracted in
2011 to cancel related party debt owed to the auction site.
Trade Me has been considered the jewel in Fairfax's crown,
growing revenue and underlying earnings since the media group
bought it under former CEO David Kirk in 2006 for about $700
The Australian media group, whose papers include the
Dominion Post, Press and Sunday Star
Times, wrote down the value of goodwill and mastheads by
$A2.8 billion in the past financial year, on top of the $A1
billion charge it has taken since 2010.
Shares in Fairfax fell 5.6% to A51c on Friday, and have
plunged 29% this year. The stock is rated an average ''hold''
based on recommendations compiled by Reuters, with a median
target price of A44c.