US stake in Hyperfactory coup for Kiwi brothers

Derek Handley will stay on as chief executive of Hyperfactory. Photo / Supplied

Kiwi entrepreneurs Derek and Geoffrey Handley have sold a cornerstone stake in their mobile phone marketing company The Hyperfactory to an American media conglomerate in a deal expected to be worth millions.

The brothers, who founded The Hyperfactory in 2000, won't reveal how much listed Meredith Corporation is paying for the 19.9 per cent stake but say it is "up there" in terms of other emerging New Zealand technology companies.

In 2006 Rod Drury sold his email storage company AfterMail to US software maker Quest for more than $60 million and in 2003 a 70 per cent chunk in Peter Maire's Navman was snapped up by US manufacturer Brunswick for $56.1 million.

New York-based Derek Handley, who will stay on as chief executive of Hyperfactory, said the company had been looking to do a deal for the past 18 months.

"We wanted to find someone who would be able to really help us move to the next stage."

The acquisition by Meredith would help the company, which grew its revenue by 80 per cent last year, grow even faster.

"When you look at New Zealand success stories like Navman they have taken 30 years to get to where they are.

"If we want to get to $100 million in revenue - we want to get there in 2009 not 2039."

The Hyperfactory only expanded overseas four years ago but already has two offices in the United States as well as sites in Shanghai, Hong Kong and India. Handley said the acquisition would not mean pulling out of its New Zealand operations, instead it would have a joint head office in Auckland and New York.

Handley said the deal would allow Hyperfactory to gain access to Meredith's clients as well as expanding its services throughout the US.

Meredith is listed on the New York Stock Exchange and last year had revenue of US$1.6 billion ($2.45 billion).

It owns 12 television stations in the US, as well as 23 subscription magazines and 32 websites.

Handley said Meredith had the ability to reach 85 million Americans a month. "All of that stuff has got to go mobile." Handley said the relationship with Meredith had already resulted in more than a million dollars worth of business and he expected that to grow to more than $10 million per year.

"I think for us the deal definitely cements Hyperfactory as a New Zealand success story."

Handley said it showed New Zealand entrepreneurs could succeed in going global despite being so far away from major world markets.

"It proves young people can do this. That you can build a global business with entrepreneurs from Auckland - I think that is the thing I'm most proud of - it's not about the money."

Handley put their success down to drive and hunger. "It is hard work. But deals like this make it all worthwhile."

Handley came up with the mobile marketing idea on the balcony of his Auckland apartment in 2000 but it wasn't until 2004 that the business began to gain steam.

In 2007 The Hyperfactory gained financial support from 42 Below founders Geoff Ross, Grant Baker and Stephen Sinclair as well as American investors Rich Frank and his son Paul Frank who helped the company set up shop in Hollywood.