Why the SEEK Limited share price could soar in 2016

Credit: Dennis Jarvis

Could the SEEK Limited (ASX: SEK) share price soar in 2016?

Following an overnight announcement from SEEK’s 63.2%-owned Zhaopin Ltd, some investors likely think it can.

What’s Zhaopin?

Zhaopin is the Chinese equivalent of SEEK’s popular Australian job seeker website, Zhaopin is growing rapidly. For example, in the three-month period to 30 September 2015, the company achieved revenue growth of 18% and operating profit growth of 5%. Following a 9.5% rise overnight, Zhaopin shares are currently priced at $US15.74.

Data sourced from S&P Capital IQ

Data sourced from S&P Capital IQ

What happened overnight?

Overnight, Zhaopin revealed it had received a partial takeover offer from a Chinese group, made up of CDH V Management Company Limited and Shanghai Goliath Investment Management LP. In a statement made by the group titled: “Preliminary Non-Binding Proposal to Acquire Zhaopin Limited”, the Chinese group said it will “acquire all outstanding ordinary shares in Zhaopin Limited…other than those owned by SEEK International Investments Pty Ltd in a taking-private transaction.”

The company’s offer price of $17.50 represented a 22% premium to the company’s last closing price, the group said. The preliminary offer will be funded by equity capital and some debt.

In response to the news, SEEK’s ASX announcement this morning read, SEEK expects the Proposed Buying Group will endeavour to negotiate arrangements with SEEK for the future management of Zhaopin.”

Foolish takeaway

In my opinion, it’s too early for investors to act on the news. However, SEEK appears to be in a good place with its Zhaopin holding, and the market is now starting to clue on to its potential. Therefore, when combined with its other growing businesses, SEEK shares appear worthy of further research.

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Motley Fool writer/analyst Owen Raszkiewicz owns shares of SEEK. Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest.

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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