By Charlotte Greenfield
WELLINGTON (Reuters) - New Zealand's top online marketplace Trade Me Group said it has received a NZ$2.56 billion ($1.8 billion) buyout proposal from a U.S. private-equity firm, trumping a rival offer and setting the stage for a possible bidding war.
The offer adds to a flurry of deals made this year in Australia and New Zealand - attractive for private-equity firms given their stable and advanced economies that offer a steady cash flow amid a global financial market rout.
California-based Hellman & Friedman offered NZ$6.45 per share for Trade Me, or NZ$0.05 higher than an offer London-based private equity group Apax Partners made last month.
Shares of Trade Me, similar to auction website eBay Inc, rose 3 percent on the news to a record of NZ$6.25 on Wednesday, just short of the indicative offer price, as investors allowed for uncertainty that a sale would go through.
"It validates our thesis that the company was being undervalued given its very low gearing and its cash generative nature," said Mark Brown, chief investment officer at Auckland-based fund Devon Funds Management that owns shares in Trade Me.
"It has a dominant position within the NZ market. You can buy a dominant player in a smaller market, but it's clearly more difficult to buy a dominant player in a global or much bigger market," Brown added.
Launched in 1999 with 15 staff, Trade Me now has more than 600 employees and says it has the most customers among online classified advertising platforms in New Zealand.
The website offers auctions and fixed-priced sales for cars, real estate and other household items. It also has jobs and online dating services.
Trade Me said it would open its books for the U.S. bidder to conduct due diligence, as it has done for the U.K. bidder Apax. Apax was not immediately available for comment.
"These kind of distribution companies like Trade Me don't require a lot of capital investment and don't require (much) working capital so they're very attractive ... for private equity firms," said Brian Gaynor, head of Auckland-based Milford Asset, which holds Trade Me shares.
Among other deals by private-equity firms in Australia and New Zealand this year, Canadian landlord Oxford Properties Group made a $2.4 billion offer for Investa Office Fund, beating private equity giant Blackstone Group.
Restaurant Brands New Zealand Ltd, operator of KFC and Pizza Hut franchises, said in October it was in takeover talks with Mexico-based Finaccess Capital that made a $578 million bid for a controlling stake.
($1 = 1.4436 New Zealand dollars)
(Reporting by Charlotte Greenfield in WELLINGTON and Devika Syamnath in BENGALURU; Editing by Miyoung Kim and Himani Sarkar)