A so-called "book build" auction process aimed at fund managers and institutions is expected to start on Monday for the initial public offer and partial flotation of Fairfax Media's online trading platform, Trade Me, financial market sources said yesterday.
They said Fairfax would have taken some comfort from this week's successful float of retirement village operator, Summerset Group, and the partial sale and capital raising by Metlifecare, before putting its feelers out for expressions of interest in Trade Me.
Trade Me is expected to register its prospectus on November 10, but the market was awash with details of the issue yesterday. The share offer will close on December 7 and the company is expected to list on the NZX on December 13.
Investment banking sources said the shares were likely to be issued in a range of $2.30 to $2.70 a share, but fund managers said the issue looked expensive, particularly at the upper end of the scale.
Between 118.8 million and 134.6 million shares are expected to go on offer, after which Fairfax Media would end up with 66 to 70 per cent of the company.
Upon listing, Trade Me would have a market capitalisation of between $910 million and $1.07 billion, putting it in the same league as The Warehouse ($1.01 billion).
At the upper end of the range, the issue could raise around $360 million for Fairfax, which it intends to use to pay off debt.
Fund managers spoken to by APNZ were all potential investors in Trade Me.
One fund manager said the Summerset and Metlifecare issues showed the New Zealand capital markets are "well and truly" open for well-priced issues.
He said there had been an element of "talking the issue up" in some media. "But at the mid to lower end of the range, it does look relatively attractive," he said.
The size of the issue meant most major funds and institutions will at least be considering taking part.
One fund manager said the company was in an "exceptionally strong" market position, with a low requirement for capital expenditure.
There were a wide range of views in the market as to how to price the issue.
A report by Fairfax's adviser UBS valued Trade Me at between 14.1 to 16 times, based on forecast earnings for calendar 2012.
"For me I have no interest in buying a company on a so-called low value multiple if it has huge future capital needs," the fund manager said. "It might have the earnings but it might have to spend it all just to sustain its business."
Trade Me had aligned its valuation with some similar companies, such as Australia's Seek, which has a price/earnings ratio of 15.1 times.
But one other fund manager said Trade Me was by a far more mature business than its Australian peers, with a lower growth profile.
He said Trade Me looked more expensive than the US online giant, Ebay, which had a ratio of just 12.7 times. "It looks to be in line with the Australian peers, but they have much higher growth rates, and it looks more expensive compared with some of its international peers."
Trade Me, which has 2.8 million members, was bought by Fairfax for $750 million in 2006.