Fund managers sounded out over Trade Me float pricing

Trade Me shares could be trading on the NZX by Christmas this year. Photo / Richard Robinson

Fund managers are being sounded out to determine the level of demand for a partial float of online auction business Trade Me by owner Fairfax Media before Christmas, which may raise $300 million.

Fund managers have signed confidentiality agreements for the process of selling 30-to-35 per cent of Trade Me.

A bookbuild is planned for November 8 and November 9 for the float and the company will list in both Australia and New Zealand, the Australian Financial Review reported.

Fund managers said the date was consistent with a listing before Christmas but they did not have documentation for that bookbuild. A prospectus has not yet been registered for the float.

The rationale behind the float is that it will raise about will raise much-needs funds for Fairfax and the online business will be valued higher by the market if it is separately listed.

UBS is the sole lead manager for the float.

Fund managers spoken to by BusinessDesk say they have seen documents suggesting a valuation of more than $1 billion for the whole business.

Fund managers seem to be comfortable with valuations around 16 times projected net profit for 2012, arguing this is in the ballpark for digital businesses. But this is regarded as being the top end of a range.

The process of the float is being managed around the New Zealand election on November 26 and there is a desire to get the float away before the summer holidays.

Fairfax acquired Trade Me for $750 million in 2006. Founder Sam Morgan is on the Fairfax Media Ltd board and former All Blacks captain David Kirk, a former

Fairfax chief executive, is set to chair the demerged company.

Fairfax-owned BusinessDay has reported that a UBS research report forecasts a profit of $68.6m for 2012, with Trade Me's board apparently committed to paying 80 per cent of net profits in dividends.

Fairfax Chairman Roger Corbett said in the annual report that the company had announced an intention to pursue the partial float of Trade Me on the New Zealand Stock Exchange, with Fairfax Media to retain a shareholding of between 65 and 70 per cent.

"We believe that Trade Me has developed to the point that it is poised to flourish as a listed company, while providing the business with independent access to capital markets in order to fund growth which will be in the interests of both Fairfax Media and Trade Me."

Fairfax would only proceed if shareholder interests were being well served, and price requirements were met, he said.

Trade Me Holdings Ltd and Fairfax Digital Assets NZ Ltd and Fairfax Digital Holdings NZ Ltd have been reserved as names at the Companies Office.