Seek quickly concluded the sell down of its Zhaopin stake to China’s Primavera Capital on Tuesday evening, but the $2.2 billion valuation reported with its half year results was clearly below market expectations.
As flagged on Tuesday, Seek’s stake in the China-based job ads group will now drop from 61 per cent to 23.5 per cent, yielding a cash payment of $697 million for Seek and a 20¢ per share dividend for shareholders when the proceeds clear.
This failed to impress the market which continued to send the stock lower on Wednesday. Shares were down 8.8 per cent to a three-month low of $25.64.
Credit Suisse were impressed with the strength of the first half result but not the sale price of Zhaopin. The broker valued Seek’s 61 per cent share at $3.3 billion compared to the transaction’s valuation of the entire Zhaopin business at $2.2 billion.
Credit Suisse said the sale price likely reflects the sovereign risk of operating in China and Seek’s need to reduce this exposure. UBS had a valuation of $3.5 billion on the entire Zhaopin business. JP Morgan said it always felt that the majority ownership of Zhaopin “represented greater risk than reward” but was still surprised at the low valuation. Seek said the Primavera consortium has a strong track record in growing online businesses…