Should Fairfax sell Trade Me to Ebay?

, posted: 29-Jan-2009 15:26

Russell Brown over at Public Address has heard rumours that Fairfax is talking to Ebay about selling Trade Me to the US ecommerce giant, and I'm thinking it might just happen.

Some history: Fairfax is a large Aussie media conglomerate that bought NZ's biggest e-commerce and auction site, Trade Me in March 2006, for a whopping NZ$700 million. That figure that hade some observers gasping and wondering if the calculator of the then CEO David Kirk had a decimal point transposing bug.

At the time, the deal seemed to make sense despite the vast amount of money Fairfax paid. Trade Me had gained critical mass in New Zealand, and was eating print media's lunch in the classifieds market. It was better to buy out the opposition, perhaps, even though Trade Me would continue to cannibalise the advertising revenue of other parts of the Fairfax group.

That was then however, and times are very different now. Fairfax is said to have A$2.5 billion in debt thanks to a massive acquisition spree and needs to reduce that amount to keep bankers and shareholders happy. Why not sell Trade Me then, to Ebay, that tried to get into the New Zealand market before, but failed (I believe due to the lack of support for local currency deals) and which is established and entrenched across the pond?

I've asked Trade Me already if there's any truth in the rumours that a sale to Ebay is on, and was told "yeah, right". Not a confirmation, not an outright denial in other words.

Does Fairfax have any other choice than to sell Trade Me, if it wants to reduce its huge mountain of debt? Trade Me is probably worth around twice what Fairfax paid for it two years ago, depending on how a potential buyer reads the market prospects and of course, how desperate the Aussie media giant is.

It would be hard for Fairfax to sell Trade Me to Ebay (or someone else) however. Trade Me owns the "rivers of gold" classifieds, property, motoring and jobs advertising markets in New Zealand and it's difficult to see how Fairfax could replace the lost revenue from those.

So, would it make sense for Fairfax to sell Trade Me?


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