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Trade Me Group Ltd (ASX:TME) receives large 26% premium takeover offer

Dual-listed Trade Me Group Ltd (ASX: TME) has received large 26% premium takeover offer to the previous closing price.

Trade Me Group is New Zealand based online auction and classifieds business for cars, properties, jobs, electronics and many other categories.

I suppose you could say it’s a combination of SEEK Limited (ASX: SEK), REA Group Limited (ASX: REA) and Carsales.Com Ltd (ASX: CAR) for the New Zealand market.

It has received a preliminary, non-binding, indicative proposal from Apax Partners to acquire all the shares of Trade Me for a cash price of NZ$6.40.

The offer appears quite attractive to Trade Me as it has decided to engage with Apex and give exclusive due diligence until 12 December 2018 to facilitate a binding offer. However, Trade Me can engage with third parties if it receives other proposals.

There is no guarantee that this deal will go ahead. New Zealand investors seem to think there’s a decent chance it won’t go ahead considering it’s currently trading at NZ$6.06, which is 5.6% under the offer price. Nailed-on takeover offers normally trade at a discount somewhere around the annualised cash rate.

With Trade Me generating earnings per share (EPS) of NZ24.33 cents in FY18, this offer prices Trade Me at 26x earnings.

In FY18 it grew revenue by 6.6% to NZ$250.4 million and grew earnings before interest, tax, depreciation and amortisation (EBITDA) by 6.2% to NZ$163.8 million.

Foolish takeaway

This seems like a pretty good bid for Trade Me, but I wouldn’t be surprised to see other potential suitors pop up considering the quality of Trade Me and market-leading categories that it operates in New Zealand.

If I were a Trade Me shareholder I’d hold a bit longer to see if there’s another bid coming or if the gap between the current price and the offer price closes.

Trade Me may soon be off the ASX, but these top stocks look like winners too – that’s why one of them is in my portfolio.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited, REA Group Limited, and SEEK Limited. 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 Scott Phillips.

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