22 Nov 2018

Trade Me bid a solid offer, former boss says

1:05 pm on 22 November 2018

Trade Me is awaiting its next stage of evolution and the bid of $2.54 billion is a solid offer, its former chief operating officer Mike O'Donnell said.

Trade Me website

Trade Me website Photo: RNZ

Trade Me, New Zealand's biggest online marketplace is reviewing a non-binding, indicative bid of $2.5 billion from Apax Partners, a British private equity firm .

The e-commerce site's former chief operating officer Mike O'Donnell (aka MOD) said the offer was a serious one.

"To get a 25 percent premium to what it is currently trading at, and to get liquidity to allow people to look at other things ... think it's a pretty serious offer," he said.

He added that in the last year Apax Partners had gone deep in e-commerce and online transactions.

"They bought Zap in Israel, a company quite similar to Trade Me. They've got GloBee, which is a cross border trading platform and they've also taken an interest in an auto trader in the UK.

"So, it's clear they're acquiring a set of assets with similar operating motives."

They'll probably hope for some synergies there, Mr O'Donnell said.

"So, what the company will be able to do is sort of double down on products and double down on trying to provide some more irresistible online experience, like we did in the early days."

He said the bid did not come as a surprise: "I think Trade Me was awaiting it's next stage of evolution. It's done a heck of a lot since 1999."

The bid of $6.40 a share was a "pretty good price," he said.

Mike O'Donnell

Mike "Mod" O'Donnell Photo: supplied

Mr O'Donnell said from here on Apax Partners gets to look at the books for a few weeks, they'll be sending people to New Zealand to get a feel for what they like.

"If they find something in there that substantially surprises them or alters the assumption from which they've made their offer of $2.54 billion, then they've got the right to either withdraw or provide a different price."

If all goes well and nobody else jumps in with a "cheeky offer above 2.54 [billion dollars], it's looking like a pretty solid offer".

Trade Me led to the start up of a huge number of companies and there's a whole eco-system bounced out of Trade Me, he said.

"I think tech's on the road to become the number one export dollar earner for New Zealand."

Trade Me was founded in 1999 by a group of young entrepreneurs and technology experts, including Sam Morgan, and was sold to Australian publishing firm Fairfax in 2006 for $700m.

Fairfax six years later floated Trade Me on the sharemarket.

The very first Trade Me homepage from 1999.

The very first Trade Me homepage from 1999. Photo: Trade Me ltd.

Trade Me is the country's biggest online site, offering consumers the chance to buy and sell items, along with advertising for jobs, cars, insurance, and property.

It reported a record annual profit of nearly $97m, with revenue increasing about 7 percent, and gave an upbeat earnings outlook.

Apax is a British-based company with investments in technology, consumer, healthcare and service sector businesses. It specialises in taking stakes in or buying out companies, where it looks to maximise value and then sell out at a profit.