Cutting down the flowers to water the weeds?
Fairfax have announced that they are selling their holdings of Trade Me group, which is an online classified platform in New Zealand. Despite Trade Me being one of Fairfax’s key performing assets (comprising $86 million of the group’s $506 million in earnings in FY12), it is being sold down to reduce Fairfax’s net debt.
Many would argue they are cutting down the roses to water the weeds but before jumping on that bandwagon, it suggests to me they have a plan. I reckon its an online plan and one they believe they can repeat.
The proceeds are required to “provide the financial flexibility to invest and to complete the company’s structural transformation”. While it makes you wonder how successful the company’s “structural transformation” will be if they offload this river of gold I reckon they have a plan to repeat their Trade Me success. The database is huge and with the right offering(s) they have the opportunity to dominate mobile the way no-one has yet. Oh, and its interesting that the share price is the closest its been to intrinsic value (according to Skaffold.com) in a decade…
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