Morningstar Research gives British private equity firm Apax Partners' $2.54 billion takeover tilt at Trade Me a 50/50 chance of success.
More: $2.5 billion takeover offer for Trade Me 'a good starting point'
The UK firm has been granted access to the local online auction site's books to undertake due diligence after making an indicative offer at $6.40 a share, a 25.5 per cent premium. Trade Me shares soared 16 per cent yesterday and were recently up a further 2.9 per cent at $6.10, valuing the company at $2.42 billion.
Morningstar analyst Gareth James said the bid wasn't entirely surprising given recent private equity interest in other firms such as Navitas, MYOB, Healthscope and Greencross. And Trade Me's relatively small net debt meant it could easily cope with the usual debt loading accompanying private equity ownership.
"Like the other targets, Trade Me is a reasonably defensive and highly cash generative business which should support a significant increase in net debt," he said in a note.