NZ sale to put nice dent in fairfax debt

Published in the Border Mail, Albury-Wodonga - December 2012

FAIRFAX Media’s reported sale of the company’s remaining stake in NZ online auction and classifieds site 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 5lper cent stake or about 202 million shares in Trade Me for about $3.05 a share through an institutional placement.

Trade Me, listed on both sides of the Tasman, closed in Australian trading on Friday at $3.22.

The sale would raise about $616 million and follow Fairfax’s decision last month to offload its specialist agricultural media business in the US for $76.24 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 yesterday.

"Therefore if they can get what they feel to be a very good price for it then definitely they should consider selling it." Mr Cox ran unsuccessfully for a seat on the Fairfax board at last month’s annual meeting.

Fairfax bought Trade Me for $566.25 million in 2006 and floated 34 per cent of the company in December last year raising $293.G4million.

It sold a further 15 per cent in June this year for $166.G4million.

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.

Mr Cox said $650 million from the Trade Me sale would "put a nice dent" in the Fairfax debt.

"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." Wealth Within analyst Dale Gillham said analysts liked to see companies reduce debt.

"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," he said.

Fairfax Media declined to comment.

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