Trade Me says it's been advised by Hellman & Friedman that it will not try to top Apax Partners' $6.45 a share offer.

Latest: $2.6b Trade Me takeover not as good as it seems, analyst warns

Apax, a British private equity outfit, yesterday upped its $6.40 indicative offer for Trade Me to a binding $6.45 a share, valuing Trade Me at $2.56 billion and matching a December 5 indicative offer of $6.45 from US-based Hellman.

Trade Me chairman David Kirk says the company's board unanimously recommends shareholders accept Apax's cash offer, "subject to an Independent Advisor's report concluding that NZ$6.45 per share is within or above its valuation range and in the absence of a superior proposal."

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Although Hellman has dipped out, Trade Me is still open to alternative offers until a shareholder vote in April - although Trade Me will have to pay a $19.2m break-free (equivalent to 4.8c per share) if a rival suitor emerges, and it accepts its bid.

The auction site's 10,000 or so shareholders may have been hoping for a king-hit raise from Apax this week, rather than simply matching Hellman's offer.

But the word from analysts was not to expect any big leap from the $6.40/share indicative offer (as has duly been the case).

Three factors kept things muted.

One was that Apax's indicative offer was subject to due diligence, but given Trade Me is a listed company with comprehensive public reporting, it's unlikely the process uncovered any surprises, Craigs Investment Partners' Stephen Ridgewell said.

A second was that while a rival offer has landed in the meantime - a $6.45 a share bid from US private equity outfit Hellman & Friedman, valuing Trade Me at $6.56b - Ridgewell described it as a "tepid" counter-offer.

There was speculation across the Tasman that the action could get limper, with Apax and Hellman merging their offers into a combined bid.

The third is that, so far, no trade buyer has stepped up - a development Ridgewell sees as necessary to energise the bidding war. China's Alibaba, which has entered other markets via acquisition of an incumbent, is seen as one possibility - but so far it's been silent. Global trade and political tensions are probably not helping on that front.

Trade Me shares hit an all-time high of $6.39 in mid-Thursday afternoon trading.
Trade Me shares hit an all-time high of $6.39 in mid-Thursday afternoon trading.

Trade Me shares ($5.10 before Apax's initial offer) jumped to an all-time high of $6.38 in early trading today - a lot closer to Apax's binding bid but still reflecting that a handful of investors are dubious any deal will go through.

Briefing documents will be sent to investors in March ahead of the April vote.

Trade Me says it has been advised that the acquisition is expected to be funded with equity committed by the Apax Funds and third-party debt financing. That is, the leveraged buy-out scenario favoured by private equity players.

Earlier this week, long-time Trade Me chief executive Jon Macdonald, who had been due to depart this month, said he would now stay on into the New Year as the bidding war continues.

Ridgewell says Trade Me sale is shaping up to be a good result for investors, but bad for New Zealand capital markets. The NZX lost Xero as it went ASX-only in the January, and software company SLI Systems is poised to be sold to a Texan outfit. Yesterday saw developments that will likely lead to the sale of Restaurant Brands to a Mexican suitor, and the the Derek Handley-founded Snakk Media go bust.

On August 22, Trade Me said it was distributing $100m via a 22 cents per share special dividend, as the online auction company announced it turned over more than $250m for the first time to deliver a 3.9 per cent increase in net profit for the year to June 30 of $96.6m.

Trade Me was founded by Sam Morgan in 1999.

Morgan sold it to Fairfax in 2006 for $700m. The Australian publisher, in turn, floated Trade Me in late 2011 at a $1.07b valuation.