May 2009

Seek taps shareholders for $100 milliom

Two months after denying it was planning a rights issue, online employment advertising company Seek has gone to its shareholders to arise $100 million.

Most of the money will be used to expand Seek's "learning" division by increasing its stakes in Think Education Group and IDP Education. Some will be used to trim Seek's $152 million net debt.

James Packer's Consolidated Media Holdingswill kick in $26.7 million to ensure its 26.7 per cent stake in Seek is not diluted. Seek's co-founders and joint chief executives, brothers Paul and Andrew Bassat, will contribute about $4 million each to maintain their shareholdings.

The 38.5 million new shares on offer represent about 13 per cent of Seek's pre-placement issued capital and are priced at $2.60 each, an 11.9 per cent discount to its closing share price on Wednesday.

In late February Paul Bassat rejected claims that Seek had abondoned a proposed rights issue because of the failure of Ten Network's attempt to raise $90 million. Ten Launched its raising on February 17 and scuttled it the next day because of a lack of investor interest. "We currently don't have any proposals on the table to raise capital," Paul Bassat said at the time. "Like all companies in this environment we have been and will continue to...look at our capital structure." 

Yesterday Andrew Bassat told The Australian Financial Review the bulk of the $100 million would be spent on the Think and IDP deals.

Seek bought 50% of Think, which was then called Amadeus Education, in October 2007 for $35.7 million.

It will now spend $42.5 million buying out Think's other shareholders, senior executives Mark Rohald and Anthony Bohm, and investors robert Gavshon and Sam Linz, the South African-born retailers who backed businesses such as Rebel Sport and Barbeques Galore. It will also spend $14.5 million to clear Think's debt.

Seek paid $35.9 million for 50 per cent of IDP in August 2006.

It now plans to but an additional 10 per cent stake from the company's other share holder, Education Australia, which is owned by the 38 Australian public universities.

Andrew Bassat said the price for the IDP stake would be completed in the next two months.

"There's been a substantial increase in IDP's value since our original investment, but it's too early to know how much thre additional stake will cost," he said.

IDP's revenue and earnings before interest, tax, depreciation and amortisation rose 34 per cent to $86 million and $19 million respectively in the December 2008 half. Think's December-half revenue jumped 156 per cent to $18.7 million and its earnings shot up 325 per cent to $1.7 million.

Seek has invested $80 million in education and training companies in the past four years.

Goldman Sachs JBWere analyst Owen Birrell said the further expansion of the learning division would reduce Seek's relaice on the online job ads market, which has declined sharply in ht elast six months, and help support earnings in the medium term.

Yesterday Seek repeated the prediction it madein February that it would report 2008-09 earnings of $93 million, down from $110 million in 2007-08.

"The trading environment remains tough, but it's not worse than we thought it would be two months ago," Andrew Bassat said. 

 Article by Neil Shoebridge- The Australain Financial Review