Online coupon and daily deals giant Groupon Inc. (NASDAQ: GRPN) looks like it is pulling out a huge win in a stake sale of its South Korean e-commerce business, Ticket Monster. By doing this, Groupon is diluting its stake, but at the same time the company is returning capital to investors. So far they seem to be pretty happy about the decision.
Groupon announced that it entered into an agreement to sell 46% of its controlling stake in Ticket Monster to the global investment firm KKR and Hong Kong-based Anchor Equity Partners. The transaction is valued at $360 million, valuing the total company near $782 million. When the deal closes, Groupon will still retain a 41% stake in Ticket Monster.
The sale is expected to gain between $195 million and $205 million on a pretax basis. According to the agreement, Groupon will receive $285 million in cash, with the remainder paid to Ticket Monster. Groupon originally acquired Ticket Monster in January 2014 for $260 million.
The deal is expected to close in the second quarter of 2015.
The proceeds from this sale are expected to be put directly into a new share repurchase plan. Groupon announced that its board of directors approved a new $300 million share repurchase program, subject to the closing of the Ticket Monster sale. The new plan is expected to commence with the closing of the Ticket Monster sale and will run through August of 2017. Groupon expects to continue repurchases under its existing $300 million share repurchase program approved in 2013. The previous program has $83 million of authorized repurchases remaining as of March 31, 2015, and is set to expire in August of 2015.
Eric Lefkofsky, CEO of Groupon, commented on the transaction:
As the Korean market developed, it became obvious that TMON would benefit from additional resources and local expertise in its drive to be the leading social commerce company in Korea. We look forward to watching TMON’s success as a continued large shareholder in the company.
Noting this sale and repurchase plan, Groupon has recast its guidance for the first quarter and full year of 2015. Reflecting the Ticket Monster sale and foreign exchange rates, Groupon now expects first-quarter 2015 revenue between $720 million and $770 million, and earnings per share (EPS) to be in a range of $0.01 to $0.03. Thomson Reuters has consensus estimates of $0.01 in EPS on $822.45 million in revenue for the first quarter.
Back in March, the Deutsche Bank team reported that the firm expressed confidence in achieving the one-year and three-year financial goals, and it was very positive at the conference. They also point out that Groupon is focused on growing selection and driving search-based transactions this year. Accomplishing those items may make the company into a prospective buyout candidate. The Deutsche Bank price target is $8.50.
Also in late March, Groupon was given a key upgrade from Wunderlich, to Buy from Hold. The firm further raised its price target to $10 from $6.
Shares of Groupon were up around 4% to $7.49 just after Monday’s opening bell, but then pulled back to $7.26. The stock has a consensus analyst price target of $8.93 and a 52-week trading range of $5.18 to $8.43.