Trade Me Group Ltd (ASX: TME) operates an online marketplace for New Zealanders. The website features online auctions and fixed-price sales for new and used goods including automobiles, real estate, and employment advertising. Trade Me also offers accommodations, dating, and group buying advertisements.
The company has entered into a combination agreement according to which the Funds which are currently being financed by the APAX Partners will acquire a 100% stake in the company. The acquisition will happen at a price of NZ$6.45 per share, called consideration. However, the transaction shall be subject to the shareholder's approval as well as consent from the Courts.
The price consideration which is being paid to the company is a significant premium of around 27% to the deduced one-month volume weighted average price also known as VWAP as on 20 November 2018. This would materialize in an equity value of NZ $ 2.56 Bn and an enterprise value of NZ$2.74 Bn. The APAX partners will thus acquire the stake at a price multiple of around 16.7 times which would be based on the Trade Me’s underlying FY 2018 EBITDA of NZ$164 Mn and around 19.7 times based on the FY 2018 EBIT of NZ$ 139 Mn.
The company’s board has without any internal conflicts and in the absence of any other superior proposal at hand has recommended that the shareholders should vote in favor of the stated scheme. However, the scheme is yet to be vetted by through an Independent Advisor's report concluding that whether NZ$6.45 per share is within or above its valuation range and is an adequate consideration or not. The directors of the company have decided & thus intent to vote through all of their shares in favor of the stated scheme subject to the same above qualifications. The company has been advised by the APAX partners that the consideration shall be paid through the issue of equity which will be committed by the APAX funds and third-party debt financing.
The scheme is subject to a few in practice and customary clauses such as the approval of Trade Me shareholder and the consent of the High Court of New Zealand. Moreover, the approval of the Investment office is also required by the company. The scheme also has the termination rights for each of the parties, as in where there is a material breach on the part of any of the parties, or any material adverse circumstances shall arise.
It is highly probable that the company’s shareholders will get the opportunity to vote on the scheme at a meeting which will be scheduled in the April 2019. If all the necessary conditions get full filled, the stated arrangement is expected to take effect from the Q2 2019.
Meanwhile, the share price of the company has risen by 36.11 percent in the past six months as on 11 December 2018. Company’s shares traded at $6.09, up by 4.64% & with a market capitalization of circa $2.31 billion as on 12 December 2018 (AEST 04:00 PM).
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