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How times change. Tradus, the one-time darling of the UK dotcom sector under its former moniker QXL Ricardo, has accepted an £18-a-share cash offer from Naspers, the South African media group. Tradus’ management, accustomed to the highs and lows of the technology roller-coaster over the past decade, can breathe a sigh of relief.
The shares had already more than doubled this year, but memories of more challenging times have not entirely faded. At the height of the technology boom, internet auctioneer QXL Ricardo had a market capitalisation of £2bn. After the crash, a combination of failed private equity bids, shareholder conflicts and legal wrangles meant that by 2005 the company was worth less than £30m. Tuesday’s offer presents a pleasing contrast, valuing Tradus at £946m, a 37 per cent premium to its average value over the month before the potential deal was announced. The price represents 30 times enterprise value to consensus 2008 earnings before interest, tax, depreciation and amortisation, a considerable premium to even perennially highly valued global media companies.
An unequivocally positive deal for Tradus’ shareholders, the purchase is less obviously so for Naspers’. It earns three-quarters of its revenues in South Africa but is expanding at breakneck pace in China, Russia and other emerging markets. Tradus will complement its geographic reach, with a market-leading business in Poland. The lack, though, of operational overlap means no synergies are expected. And there must be suspicion that Naspers is overly keen to spend its $1.5bn cash pile, two-thirds of which is offshore and must be spent before the year end or repatriated.
Admittedly, others share its optimism over Tradus’ prospects. Citi, even in these difficult days, is providing £700m of bridging finance. But Naspers’ shareholders seem warier. The shares fell slightly on Tuesday, suggesting a fear that the days of overpaying for internet companies with uncertain future revenues are not necessarily over.
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