The SEEK Limited (ASX: SEK) share price was out of form on Tuesday and sank 7%.
Investors were selling the job listings giant's shares due to weakness in the tech sector and the shock revelation that its founder and CEO, Andrew Bassat, was stepping down.
Will the SEEK share price perform better today?
The SEEK share price could be given a boost today by news that it has finalised an agreement to sell down its stake in the China-based Zhaopin business.
According to the release, the company has entered into an agreement with a consortium of investors led by Primavera Capital Group.
Primavera is a leading China-based global investment firm, which will become Zhaopin's largest shareholder. Following the completion of the sale, SEEK's ownership will reduce from 61.1% to 23.5%.
The company expects to receive gross proceeds of ~A$697 million, which implies a Zhaopin valuation of ~A$2.2 billion.
Management advised that the sale is a continuation of SEEK's strategy to manage its portfolio and create the right structure to support Zhaopin's long-term growth aspirations.
What's next?
When SEEK released its half year results yesterday, it decided against declaring an interim dividend.
However, in lieu of an interim dividend, the Board intends to declare and pay a dividend of ~20 cents per share following receipt of SEEK's proceeds. The record and payment dates will be determined upon declaration of the dividend.
Management also notes that the sell down of Zhaopin will impact its ability to meet its $5 billion aspirational revenue target by FY 2025. Depending on completion, it could also impact its ability to achieve its FY 2021 guidance.
However, management notes that its long-term strategic drivers and substantial revenue opportunity remains intact regardless of the sale.
SEEK's CEO and Co-Founder, Andrew Bassat, commented, "We are very proud of our journey with Zhaopin. When we first invested 15 years ago Zhaopin was a loss-making and distant number three player. Our long-term approach combined with the strong management team led by Evan Guo has transformed Zhaopin into a market leader across many key metrics and it now generates strong cash flows."
"The Consortium will play an important role in helping Zhaopin to deliver on its long-term growth strategy." "Through this transaction, SEEK has achieved a strong return of over 5x and we have rebalanced our portfolio weightings. This transaction also creates significant balance sheet flexibility to re-deploy capital into high returning initiatives across SEEK."
