By Paul McBeth
Dec. 17 (BusinessDesk) – Fairfax Media has confirmed it has an underwriting agreement with UBS New Zealand to sell its stake in Trade Me for A$3.05 a share, generating gross proceeds of A$616 million.
Shares of Trade Me have been halted pending a bookbuild in Fairfax’s 202 million shares, or 51 percent of the New Zealand auction site.
“The proceeds from the sale will reduce Fairfax’s net debt and will provide us with a very strong balance sheet and the financial flexibility to invest and to complete the company’s structural transformation,” Fairfax chief executive Greg Hywood said in a statement to the ASX.
The sale price represents a 5.3 percent discount to the A$3.22 closing price on the ASX on Friday. The dual-listed shares closed at $4.05 in New Zealand on Friday. Trade Me stock is rated an average 'hold' based on eight analyst recommendations compiled by Reuters, with a median target price of $4.10.
The latest tranche of Fairfax's exit will mean the media group will have pulled out some $1.5 billion since last year's partial float and subsequent sell-down and also through saddling Trade Me with $166 million of debt. That doesn't 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 chief executive David Kirk in 2006 for some $700 million, a price considered steep by analysts at the time.
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 will be debt-free after the News Corp demerger.
The Australian media group, whose titles include New Zealand's Dominion Post, Press and Sunday Star Times newspapers, wrote down the value of its goodwill and mastheads by A$2.8 billion in the latest financial year, on top of the A$1 billion charge it has taken since 2010.
Shares in Fairfax fell 5.6 percent to 51 Australian on Friday, and have plunged 29 percent this year. The stock is rated an average 'hold' based on 13 analyst recommendations compiled by Reuters, with a median target price of 44 Australian cents.