Trade Me's 10,000 shareholders - many of them mum-and-dad investors - could miss out on tens of millions in dividend payments if the $2.6b private equity buyout goes ahead.
Craigs Investment Partners' senior research analyst Stephen Ridgewell warns that while Apax Partners $6.45/share takeover offer is good, it's not as good as it seems.
Ridgewell anticipates the takeover will not wrap up until around June or July next year.
That's a not unreasonable supposition. A shareholder vote is not scheduled until April, and the Overseas Investment Office typically takes two to three months to make a decision following investor approval (the agency has no set timeframe).
In other words, current shareholders will own Trade Me for the whole of the company's 2019 financial year, which wraps up on June 30.
Yet Ridgewell highlights that on page 45 of the takeover Scheme Implementation Agreement released on December 12, Apax is given the power to veto any dividend payout during FY2019.
He expects Apax to either put the kibosh on Trade Me's interim dividend, which would otherwise be paid out in March, or pay it out but reduce its $2.56b offer by an equivalent amount.
Ridgewell notes that Trade Me has historically paid out 80 per cent of its profits to shareholders - implying full-year dividends of around 22 cents per share for 2019 if it meets its forecasts.
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Trade Me made a $96.6m net profit last year. It also paid out a $100m special dividend.
The analyst has reduced his target price to $6.19 a share to reflect the disappearing dividends - or only 13 per cent above his $5.47 standalone valuation (Trade Me was at $5.10 before Apax made its initial, non-binding offer of $6.40 a share).
Is that enough of a premium for taking 100 per cent control? Ridgewell says it's impossible to say because only Trade Me management and Apax have seen the company's 2020/21 budgets.
He expects the numbers to be revealed in the Target Company Statement, due in February. His advice to shareholders is to sit tight until then.
Another wrinkle: Trade Me's board is currently recommending investors take Apax's offer because it is the only binding bid on the table.
Earlier today, rival suitor Hellman and Friedman dropped out, but another buyer could emerge at any point up to the April vote.
But if it does, Trade Me will be hit by more Apax fine print: a $19.2m break fee (equivalent to $4.8c per share) if it goes with a rival offer.
Trade Me declined the opportunity to comment.