Seek faces opposition to Zhaopin privatization plan
21 Mar 2017
Global recruitment platform Seek (ASX: SEK) is facing opposition to the planned privatization of Zhaopin (NYSE: ZPIN) from a number of Zhaopin’s minority shareholders.
The mostly Australian shareholders have taken issue with the plan for a consortium, led by Seek, to buy Zhaopin’s outstanding shares for $18 U.S. per American depository share (ADS), which they claim undervalues the business.
Perpetual Global Share Fund’s head of global equities Garry Laurence told The Australian Financial Review (possible subscription) that the offer was “low ball” and said a price of $20 U.S. per ADS was more appropriate.
It’s understood that Seek is unwilling to share Zhaopin’s $300 million AUD ($230.2 million U.S.) cash on balance sheet, unless it gets a reduction in the purchase price.
But, Laurence told The Australian Financial Review: “If you strip out the cash, the valuation is extremely cheap relative to other high-growth internet companies.”
He said there’s about $5 to $6 U.S. of cash per share not included in the current proposal, and even if it were, “it’s still a decent discount to Seek’s valuation” for “one of the fastest growing parts of their business”.
Kevin Bertoli a portfolio manager of Asian equities at PM Capital, another Zhaopin minority shareholder, said the price the consortium offers was below comparable multiples Seek had paid in the past to acquire other businesses in the region.
The Australian Financial Review reported that Seek paid a multiple of 30 times the trailing earnings in 2014 for Southeast Asian job site Jobstreet, but is only offering a multiple of 18 or 19 times for Chinese job site Zhaopin.
That’s also well below the multiple of 25 times trailing earnings assigned to Seek.
Seek derives 63 percent of its revenue from its international businesses, of which Zhaopin brought in the lion’s share — $184 million AUD ($141 million U.S.) from a total of $309 million AUD ($237 million U.S.) in international revenue, an increase of 11 percent on the prior comparative period (PCP).
However, Seek’s chief executive Andrew Bassett said Zhaopin’s shares were illiquid on the New York Stock Exchange (NYSE).
Indeed, Zhaopin’s never paid a dividend the entire time it’s been listed on the NYSE, and Bassett said the plan is to re-list Zhaopin on an exchange that will assign it a higher valuation.
If the planned privatization goes ahead, it’s sure to please billionaire Australian businessman James Packer, who owns an estimated two-thirds of the shares not already owned by Seek.
He’s recently embarked on an aggressive string of asset sales to get Crown Holdings out of debt, and it’s expected he’ll earn around $200 million AUD ($153.4 million U.S.) from the sale of his Zhaopin shares, according to a report in The Australian.
A decision on the Zhaopin deal is understood to be imminent.
Angela is a writer and journalist based in Sydney, Australia. She has extensive knowledge of the Australian real estate industry, having started her career in real estate advertising at News Limited newspapers, where she worked across a number of different mastheads in Sydney. She s also worked in television, magazines and online, and regularly contributes feature articles to The Sydney Morning Herald, MiNDFOOD and The Newcastle Herald. Angela also works as a content writer, creating written content for a number of SMEs across an array of industries, including real estate, education, technology and digital media.