Trade Me won’t pay an interim dividend as the $2.56 billion takeover deal with British private equity firm Apax Partners means the online auction site is likely to leave the NZX.
The board decided against making the payment, which needs approval from Apax, saying the tax implications were such that it would be detrimental to some shareholders. However, if the $6.45 per share scheme implementation agreement doesn’t get over the line, the board will consider declaring a special dividend, chair David Kirk said.
Forsyth Barr analyst Matt Henry had forecast a dividend of 10 cents per share, which would have been up from 9.1 cents a year earlier.
“We carefully considered what is best for our shareholders and, while payment of an interim dividend would benefit some, it would also negatively impact others due to individual tax circumstances,” Kirk said in a statement. “After carefully considering the pros and cons, we don’t believe it’s in the best interests of our shareholders to pay a dividend at this time.”
The Wellington-based company spent $5.8 million on the upcoming transaction and an unsuccessful rival bid from private equity firm Hellman & Friedman, which knocked Trade Me’s bottom line. That included $3 million transaction fee for Goldman Sachs Australia, Trade Me’s financial adviser, which stands to get another $7 million on the implementation of the Apax deal.
Trade Me’s net profit fell to $44.4 million in the six months ended Dec. 31, from $46.4 million a year earlier. Stripping out the one-off transaction costs, operating earnings were up 8.1 percent $50.2 million on a 7.3 percent increase in revenue to $132.2 million.
The company’s shareholders are likely to receive a notice of special meeting next month, where they will vote on whether to approve the deal. The notice will include an independent adviser’s report assessing the deal and will outline the board’s rationale for supporting the scheme.
The shares last traded at $6.37, a discount to the takeover offer, and have jumped from $5.10 before the overseas interest emerged in November.
A scheme of arrangement has a lower bar to get shareholders over the line, requiring 75 percent support and at least half the company’s votes cast, as opposed to the 90 percent acceptance threshold needed in a formal takeover to enforce mop-up provisions. The High Court and the Overseas Investment Office also need to approve the transaction.
Chief executive Jon Macdonald, who has stayed on past a planned December exit to help smooth the transition, said the latest period delivered record revenue with strong gains in its classifieds division.
He affirmed annual earnings guidance for revenue and operating profit growth of 5-8 percent, implying revenue of revenue of $262.9-270.4 million and profit of $101.4-104.3 million.
Trade Me’s classifieds division lifted earnings before interest, tax, depreciation and amortisation 12 percent to $52.3 million on a 13 percent increase in revenue to $77.1 million. That was driven by a 26 percent gain in property revenue, with Macdonald saying the ‘premium listing’ product had been well-received by real estate agent clients.
Motor classifieds were up 8.8 percent, while jobs classifieds rose 7 percent.
Trade Me’s general marketplace earnings were up 7.4 percent at $26.2 million, on a 4.8 percent increase in revenue to $37.1 million.
Its other businesses, such as payments, insurance comparison, and general insurance, posted a 20 percent decline in earnings to $6.7 million on a 7.5 percent fall in revenue to $18 million.