Yad2, Israel’s largest classified ads website, is being sold to Germany’s Axel Springer Digital Classified for a price that could reach as much as 806 million shekels ($234 million), the website’s owner, Bezeq, said on Tuesday.
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The sale, which was made by Bezeq’s Walla Internet unit, is officially for 787.5 million shekels but is likely to be adjusted upward to the higher figure before it is completed, Bezeq said. The final sale is contingent on regulatory and other approvals, and a commitment by Walla and Bezeq not to enter Yad2’s business for the next two years.
“Besides the consideration of price, it was important for us to choose a buyer who could guarantee the continued development and success of Yad2,” Walla CEO Ilan Yeshua said in a statement on Tuesday. “Axel Springer is a strategic investor that owns a great number of classified ad sites around the world.”
Axel Springer Digital Classifieds is a joint venture 70%-owned by the German media company Axel Springer, publisher of Germany’s best-selling daily Bild, and 30% by the private equity fund General Atlantic. Its holdings include SeLoger, the leading online real-estate classified ads business in France; StepStone, a leading online jobs classifieds business across Europe; and Immonet, an online real-estate classified ads business in Germany,
For Bezeq and Shaul Elovitch, who controls the company through his Eurocom group, the sale will reap huge profits. Bezeq will be left with a pre-tax capital gain of 560 million shekels before taxes. In addition, Yad2 paid Walla some 68 million shekels in dividends in the four years it owned the company.
Walla bought a 75% stake in Yad2 in 2010 for 117.5 million shekels from Coral-Tell Internet Services. It acquired the remainder last November for 50 million shekels, thus valuing the company at 300 million shekels, nearly double what it was worth in the first sale.
Under Walla’s control, Yad2 has doubled its revenue and nearly tripled its profit, garnering 16 million visits every month with over 10,000 ads uploaded daily. Over half the traffic on the site is through mobile devices.
Yad2’s earnings before interest, taxes, depreciation and amortization jumped to 70 million shekels in the four years, from 15 million shekels.
Bezeq decided several months ago to sell Yad2 after seeing valuations for similar sites around the globe rise to an enterprise value/EBITDA of 20 or more. The ratio that measures the value of a company’s operations minus debt to future cash flows.
Some 15 buyers emerged. Besides Axel Springer, they included the British buyout fund Apax Partners, which is active in Israel and whose holdings include food maker Tnuva; a second buyout fund, Warburg Pincus of the United States; and the German Internet company Rocket. After raising its offer by tens of percent, Axel Springer came up with the highest price among the contenders, valuing Yad2 at an enterprise value/EBIDTA of between 17 and 20.
“The sale and Yad2’s valuation are a vote of confidence in the Israeli Internet market in general and Yad2’s achievements in particular,” said Yeshua. “Yad2 is a perfect example of a local Internet company that succeeded to improve over the year and create real value for its founders, owners, employees and the Israeli economy.”
Yeshua said that part of the proceeds from the sale would be used by Walla to expand its content activities. A web portal that provides news, search and e-mail, Walla is considered one of the most popular websites in the country.
“We will significantly increase our investments in content, particular in video and news,” he said. “While we laid off staff in the past year, we didn’t touch the content side, in fact we added to it.”
Yad2’s CEO, Yavin Gill More, said with the change of ownership at the company there would be no shake-up of management or any layoffs. “The tie-up [with Axel Springer] will enable the company to learn from the wide range of digital sites in Europe and its largest provider of classified,” he said.