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Localist sold to CEO, private investors in multi-million deal

UPDATE: RNZ reports Localist sold for "around $8 million." If correct, the figure represents a substantial loss for NZ Post, which wrote off $28 million over the four years it owned the service.

Localist CEO Christina Domecq - who led the private buyout - and NZ Post refused to comment on the price.

"There are no plans to reduce staff," the Localist spokesman said. The site employs 114 and "is actively hiring digital, business and sales experts."

A rep for Ms Domecq told NBR that RNZ's $8 million figure was wrong, but refused to say what the actual figure was for the taxpayer asset. It was "several million," he said.

In December, Ms Domecq told NBR that Localist is now profitable.

The service - which she made online-only after taking over in January  2013 - has listings for 33,000 businesses; 3000 of which are paid, she told NBR.

It was now able to make some progress paying back the money it owned to its parent, the CEO said.

Localist was set up in 2011 as a fully-owned but independently operating subsidiary of NZ Post, bankrolled by a $25.6 million internal loan.

Initially it had five print directories, each aimed at a different area of Auckland. It immediately faced competition from a rival Yellow Pages Group iniative, Yellow Local, in print and online (although never officially abandoned, most Yellow Local sites for various Auckland suburbs have not been updated since late 2012). Since May last year, Localist has also faced competition from the NZ version of Yelp - the US webite that Localist's original CEO, Blair Glubb, frequently cited as a role model.

Ms Domecq, who was raised in the US and UK and followed her Kiwi husband to NZ, is independently wealthy by dint of being a member of the family that founded a Spanish sherry dynasty and was part of Allied Domecq before its acquisition by Pernod Ricard in 2005.

Her other investments include in NZ include Stolen Rum, software development outfit Unlimited Realities and a Mexican food truck business, MexiKai.


EARLIER: New Zealand Post has sold its directory company Localist, which has around 100 staff, for an undisclosed sum.

The business was bought by a group led by chief executive Christina Domecq. Other members of the management buy out team include Rob Campbell (who was recently appointed chairman of Summerset group) and former Tegal chief executive Andrew Stevens. 

The controversial American was hired in January 2012 to oversee a restructure that included the scrapping of Localist’s print directory business. Ms Domecq says in a release changes have resulted in 200% growth year on year as it has expanded into 10 regions nationwide. 

New Zealand Post Group CEO Brian Roche said the sale is a good outcome for New Zealand Post, which is now strongly focused on core services.

Mr Roche said Localist had entered a new phase which was showing signs of progress.

“There have been encouraging signs of progress for Localist over the last 12 months and its new team is excited about its future direction.”

New Zealand Post will work with Localist over the next two months to ensure an orderly transition of the business.

More by Chris Keall

Comments and questions
37

A dog with fleas. The Board should be shot for attempting it.

Absolutely true Anon.

NZ Post come clean on how much tax payer money was wasted on this venture. Well over $20m!

And the next question is, what would NZPost have had to pay somebody to actually take this dog off their hands??

Go back a few years and review the NZ Post ballsup with their foray into the Australian Courier market, they lost millions on it. They are inherently incompetent.

I hope NZ post got enough out of it to pay my looming redundancy.

Be interested to understand how the CEO behaved during this process. Did she run it down, talk it down, then mop it up for a song?

Suspect the price she paid will be 2/5 of bugger all...

Any (soon to be ex-) employees able to spill?

I wonder if mgmt might now be more responsive to following up on business opportunities?

More tax payers money wasted by NZ Post. The CEO is a little like our govt in that you can not rely on anything they say. Stop stealing the taxpayers cash and get the restructure finished and clear out the dead wood and stop stripping the strong business units under the disquise of a restructure.

Seems strange for NZ Post to talk the business up when they have sold it.

If it's doing so well now, why not try and let the business recoup the $20 million it cost taxpayers??!!

This is nothing more than a press release with everyone patting each other on the back.

Hi Steve, that's a fair call.
We will be following up on this.
NBR Publisher

Todd, I see on another site that the CEO is saying the loss and the sale price is commercial sensitive. This is not an acceptable answer, why is it sensitive. It cannot impact on NZ Post other than to raise questions about the judgement of the people involved and the board. Competitors might just have a good laugh but not much more.

As for the buyer what does it matter what they paid for it, cannot change competitor reactions, unless of course other parties come out of the woodwork and say they would have paid more for the business.

Too many people use commercially sensitive as an excuse. In this case it is not acceptable, at least the loss should not be confidential.

Also given the CEO was appointed to turn this around, there should be some comment on why she failed? or if she did not fail, one assumes the purchase price reflects this.

Hi anon - I agree the sum should be made public, and NBR will continue to press on that point.

In a December 2013 interview with NBR, Christina Domecq (who arrived in January 2013) said she would have done things a lot differently had she been in charge from the get-go when the $25.6 million loan was extended from parent company NZ Post.

Without detailed financials, it's hard to know how Localist is doing in a market where many don't go to Localist, Yellow or Yelp but just head for Google to find a service, or seek a community rating.

We do know that Ms Domecq restructured Localist quite radically. She axed the print directories, culled lots of managers, expanded its coverage from Auckland to nationwide and ramped up community interaction and Facebook-style features.

In December, she told NBR that Localist had squeaked into the black and had begun to make progress paying down its loan from NZ Post.

Whatever she paid, it seems negotiations were hard-fought. It was way back in October 2012 that NZ Post first engaged Grant Samuel to find a new investor or buyer for Localist.

But Chris in most cases when you want to sell something you run a competitive process? In this case it seems very strange that nothing was heard until the deal was struck. Almost as if someone wanted it swept under the table...

Have no connection at all with this deal Just an interested bystander.

However I believe it's fairly typical to include a confidentiality clause in these sorts of deals, that precludes either party talking about price.

NZPost have digital platforms as part of their strategy.

http://www.nzpost.co.nz/about-us/investor-centre/our-financial-story/where-were-going

After $30M invested they've sold one for $8M. The CFO says the loss isn't that much given the tax losses they claimed. Does he not know that the shareholder is the Crown). and therefore this loss of tax income is as real to the shareholder (i.e. us) as the minimal dividends post pays.

This deal looks bad both in terms of the loss, lack of transparency and the contradictions in terms of Post's strategy and actions.

The ROA on the NZ Post is very poor and while some progress has been made in efficiency, by way of easy layoffs and service reduction, there are still too many snouts in troughs (the annual report has the top 5 employees earn close to $8M yet the dividend is only $5M) and two many subs that don't appear to make commercial sense. Even the "jewel in the crown" Kiwibank has capital, customer service and technology issues. Without the benefit of Posts' credit rating it would be unlikely to stand on its own two feet for long. Indeed some of its profits are derived from former post operations that were moved to presumably to enhance the banks profitability. There's no intention of a dividend for at least the next two years. It's one of only two banks in the class action suit over fees, it sold kiwi mortgages overseas and there's nothing to show its contribution to the economy offsets the tax, salaries and capital provision than the "bad" aussie banks pay or provide nor that it has lowered pricing at those banks. Compared to Coop and TSB metrics the bank looks poorly run given the support it gets.

Time the Govt. took this organization to task. It should be pared down to an essential service operation with management tendered out. The financial service arm should be floated and the country benefit from the capital return.

Agree that normally included, but for a government agency the issue is why should they. I once had a stock analysts from the US sit down with my CEO and in 5 minutes he was telling us how efficient we were and what production rates etc were on the machines we were running. this was all HIGHLY CONFIDENTIAL information other than to anyone with any industry knowledge.

For those in the industry and the time and patience they can figure out or should be able to what the opposition are doing.

As someone else points out reading the accounts will probably do in 6 - 12 months. The company is just hoping no one bothers.

PS if you want to see an exmaple, look at the NZ Venture Investment fund, their annual report comes out with no PR, just before Xmas - why - so no one asks any questions. NZ Super announces what they make - good or bad. NZVIF -4% pa returns since inception, over 25% of capital destroyed. No one cares. That is $50m (including overheads) down the tubes in actual $$$s add in the lost returns and they are much worse than these guys.

How much tax-payer money was spent on Localist ?!

$20m would be nothing short of a disgrace given the performance of Yellow Pages.

NZ Post wrote off $28 million on Localist.

In hindsight, you could argue that the print-first strategy was wrong, but on one level I still admire NZ Post for being entrepreneurial and giving it a go.

I admire entrepreneurial activity more when I'm not being forced to pay for it. If someone wants to 'give it a go' they should put their own bloody money up, not play businessman with taxpayer funding.

look at the NZ venture Investment Fund - more of your money going no where --- fast.

A replay of Kiwirail / TOLL in the making ?

If they cut there losses and recovered 8 m I say well done.

8 mill better than it could have been if they kept ping.

It is a clear conflict of interest. If it was profitable it should have gone up for public sale or the CEO should have argued to kept it so profits could pay back the capital, or sell it for it's true worth. You can't wear the hat of seller and the hat of buyer and be impartial, not when it is taxpayers money.

It WAS up for public sale. And it would be fair to say that if they actually got $8m (and I suspect the number was far, far lower, and probably "vendor financed" - ie only having to write out a fraction of the purchase price) would be a very good outcome. It was a terrible asset.

You are correct. It was up for public sale. NZ Post was up front about engaging to Grant Samuel from October 2012 - and there was nothing to stop all-comers making an offer. Agree with your comments on the possible price.

"Squeaking a company into the black" does not make it valuable. Local list was strategic failure, no surprise, and in its current form has completely reinvented itself. Yet another online directory is hardly a good business for NZ Post, better to get out. Sure there needs to be some money for assets and the current mailing list. Other than that, hardly a valuable business right now.
The price is being held back for two reasons. Private people really do not like their business dealings aired in public and NZ Post wants to spin its strategic failure. hence the "up" comments. The figures should be in the small print in the annual report.

I hardly think a 1.79% shareholding in Stolen makes her a player in that company.Spinvox anyone!!!

Have a look at the Chair. Cullen was big on innovation as Min. Finance. He will now realise it is a lot easier to say than do.

That's really funny.

Kiwisaver. Superfund. KiwiBank (ok, Anderton, but on Cullen's watch).

An average of one significant innovation per term, all 3 of which being well beyond the grasp of any government before or since.

There is no question Cullen was the best Minister of Finance we've ever had, at least in my lifetime. His PM of course had a more debatable tenure. But at least she had him.

And, yes, NZ Post management or governance or both appears to be inept.

Amazing the people here crying foul at the skullduggery of selling one state asset that was losing a little bit of money, elsewhere claiming a market (if not personal) victory in the sale of other state assets which were making lots of money.

Agree, as a state owned entity (is NZP still state owned? I can't keep up), we should know what went down.

No one cares it was sold, what they care about is taxpayer money being invested in the first place and the conflict of the buyer being the CEO as well as NZ Post trying to hide just how much money they lost for us.

Like Yellow pages, this sort of localised directory service is superfluous these days. While I'd never heard of Localist before this, I just gave it a shot. I entered Dunedin as my location and was offered a handful of coffee bars and a Queenstown restaurant. Queenstow is 4.5 hours from here... why would you bother? A Google search is so much more effective and reliable in these connected times.

We now have the answer to a question posted two years ago when Ms Domecq was appointed. Both NZ Post and Ms Domecq have made tens of millions reduce to nothing.

John H wrote:

:Be interesting to see which 4 companies she successfully founded :and sold?
:
:The first one went bankrupt in the USA! http://www.allbusiness.com/government/government-bodies-offices-law-courts-tribunals/10602370-1.html (bullet point 4 in her profile)

:And then taking 100 million pounds and turning it into a *actual* final :sale price, after paying off debt, of 600 pounds is not a success in :anyone's world! (bullet point 2 in her profile)

:Did anyone actually check her properly rather than believing the hype :of her CV? (Found this stuff in 30 seconds via Google)

:Why would Localist employ someone who has cost investors 100s of :millions of dollars in the last decade to provide advice on growing a :business?

Well done Christina. Best business role model anyone could have!

You could also take a view that the losses were in the first couple of years, and that in the last 12 to 18 months the business has been relatively break-even even given significant investment to expand nationwide. In which case rather than complain about losses, the better question would be why NZ Post sold a growing digital asset with a predominantly B2B focus.

I'd say this will IPO in a year or so with significant profit to the new owners.

Domecq strikes again in similar way she has in the past, post invested 28mil in year one with a further 11mil in year 2. Domecq in fact did not get rid of print she was actually the one who increaded the number of print products including the magazine that was a total failure, so the comment she would do things different is rubbish.

So all up there was close to 40mil invested by NZ post if not more. 28 mill was written off another 10 mil was leant. Domecq came onboard. There was never an increase in sales revenue, rather a huge reduction in operational cost. The revenue of this company didn't increase. Profitability was gained by reducing operating costs, hence Mr Glubb's removal and a number of key staff. No surprise that she's purchased this business. She know's how to run a tight ship.