Trade Me IPO priced at top end of range

Fairfax Media has confirmed the industry’s worst kept secret: Trade Me will list at $2.70 (underwriter UBS initially put forward a range of $2.39 to $2.70) - giving it a market cap of $1.069 billion.

Leaks suggest the offering is "twice covered" at $2.70.

But despite the apparent over-subscription, some of the gloss was taken off the listing late yesterday with the revelation that Trade Me has paid a $220 million dividend to its Australian parent, and lent it $192 million. Fairfax Media has  saddled the auction site with a chunk of its debt.

A prospectus has been filed with the ASX (download it here). As of early this morning, it had yet to file the document with the NZX.

Forecasts
Trade Me is forecasting pro forma earnings before interest, tax, depreciation and amortisation (ebitda) of $104.8 million in 2012, up 8% from $97 million in 2011, rising to $110.9 million in 2013.

It expects to make a profit of $65 million this year on revenue of $144.8 million, up 12% from $128.8 million in 2011. Revenue is forecast to increase to $154.1 million in 2013, with profit rising to $68.5 million.

The numbers presented in the prospectus attribute an enterprise value of 11.1 times ebitda and a forecast price to earnings ratio of 15.6 times.

The offer to investors is expected to open next week, assuming FMA approval.

Trade Me will become a stand-alone company, chaired by former Fairfax CEO David Kirk and dual listed on the NZX and ASX under the ticker “TME”. 

Fairfax Media will retain a shareholding of 66% in Trade Me. 

Shares are expected to begin trading on December 13.

The Fairfax-owned AFR, which has leaked a steady stream of filing details ahead of the IPO, said yesterday that three quarters of the partial float was expected to go to New Zealand investors.

The lead managers for the listing are Deutsche Bank/Craigs Investment Partners, First NZ Capital, Forsyth Barr and Goldman Sachs. ASB Securities and Direct Broking are co-managers.

Preferred offers
The main part of the offer will be to investors via brokers, and to institutions, but there will also be priority offers, including one to more than 28,000 Trade Me members.

Fairfax shareholders and employees will also get priority offers, which will account for 4% of the 136.4 million shares issued in the partial float.

Trade Me financials revealed
The pre-IPO documents show Trade Me recorded a profit of $69.7 million in 2011, up from $63.6 million in 2010.

Total revenue came in at $128.8 million, compared to $114.4 million in 2010.

Total assets, including the $39.15 million due from Fairfax, were $61.97 million, with liabilities of $42.1 million.

Total equity as June 30 was $19.8 million after paying out $220 million in dividends to Fairfax.

Fairfax Media made an after tax loss of $A400.9 million in the year to June 2011 after writing down the value of its mastheads, customer relationships and goodwill by $A650.7 million.

Fairfax bought Trade Me in 2006 for $750 million.

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