Globally-focused online jobs giant SEEK Limited (ASX: SEK) announced plans to privatize NYSE-listed Chinese jobs portal Zhaopin last week in a move that seemed to impress investors with the Seek share price lifting 4% in response.
The deal will see two U.S. private equity groups buy the publicly traded shares in Zhaopin, while SEEK retains its 61.3% interest in the share capital of Zhaopin and an effective controlling stake.
The SEEK share price probably rose in response to the news as the offer is at US$18 per Zhaopin ADR, which is at a substantial premium to the value the market was ascribing to the company at around US$16 per share prior to the offer.
If the business is taken private with SEEK International retaining effective control it will also mean SEEK and its investors should continue to enjoy the benefits of majority-owing a Zhaopin asset that is growing at rapid rates in a huge market. The opportunity to partner with private equity interests rather than public owners may also bring the additional expertise in China as SEEK attempts to cement Zhaopin's market-leading status in a complex market.
Other Growth Opportunities
SEEK's international businesses now already produce more revenues and operating earnings than its domestic business as it has market-leading jobs sites in China, Hong Kong, Malaysia, Singapore, Mexico and Brazil among other large global economies.
It is also investing heavily in "early stage ventures" in developing markets in India, with nine African countries also operated in where it has multiple vertical jobs, car, and real estate portfolios.
Its Australian business is also performing well, despite the ominous competitive threat of employment and recruitment eco-system LinkedIn Corp. In response to this threat SEEK has been investing in other businesses like Jora and JobAdder, while also developing businesses like Ximble, Sidekicker and Workana that target short-term employment contracts in the hospitality, retail and blue-collar markets.
As a result of all its investment SEEK is forecasting a net profit of $215 million to $220 million before adjusting for growth investments of approximately $25 million. The company is due to reveal its results on February 21, when investors will take a keen interest on how well it is tracking against its forecasts.
Given the long-term potential and founder-led nature of the business the stock looks reasonable value to me at $15.50, although investors may benefit by waiting for its results before buying as any short-term hit to profitability is likely to see the stock sold off.
Another business in this space with good long-term potential and a semmingly on the ball management team is property focused REA Group Limited (ASX: REA).
