TECH DEALS: Hot properties

Tech Deals is a weekly column covering the latest deals in one of the busiest sectors for M&A. To read previous articles go to our Tech Deals page.

There's plenty of deals momentum in the local scene with foreign players and corporate heavyweights turning their attention downunder. This week online real estate classifieds business iProperty Group is potentially on the radar for French giant SeLoger.com, while our tech startups keep turning heads overseas.

iProperty Group

We start with ASX- listed iProperty Group, the owner of iproperty.com which has welcomed another substantial investment from French real estate portal SeLoger.com. SeLoger is owned by one of Europe's largest media entities, Axel Springer Group, and after picking up a 9.4 per cent stake in iProperty in June this year for $8.9 million it has now returned to pick up another seven per cent stake for $12.6 million.

The Kuala Lumpur-based company is majority owned and founded by Asian investment outfit Catcha Group and Melbourne-based Classified Ad Ventures, which is run by former REA Group CEO Simon Baker. And the move by SeLoger to take a 16 per cent interest has now set tongues wagging that all of iProperty may be in its sights.

SeLoger CEO Roland Tripard, who has been on the board of iProperty since June, said in a statement the increased investment was another key step in stamping the French giant's presence in Asia.

And they really can't have picked up a better vehicle than iProperty, which currently operates 17 real estate portals spanning all corners of South-East Asia, from Malaysia, Indonesia, Philippines, Hong Kong and India. The company also recently launched a new commercial and industrial property portal, CommercialAsia.com, to strengthen its brand in the region.  

Despite its dominant market position iProperty is still running at a loss, although that did improve from $1.5 million in the first half of 2010 to $1.1 million in first half 2011 and SeLoger's money certainly helps the balance sheet as well.

Chairman Simon Baker, who spent over seven years at the helm of realestate.com.au, said in August that iProperty's market leadership position can be utilised to create upside value and SeLoger's continued investment should help accelerate  growth.

Grbble, Trunk.ly, Walmart, AVOS

Data mining firm Kaggle's win earlier this month highlighted the allure of Australian tech startups and the flag has been held further aloft by the likes of Grabble and Trunk.ly, both of which have been snapped up by overseas interests.

Sydney-based startup Grabble, which has developed a point-of-sale smartphone app, has been picked up by Walmart Labs, the digital arm of the US retail giant Walmart.  The firm was founded by Stuart Argue and Anthony Marcar in January last year and given a helping hand by incubator Startmate. The terms of the deal were not disclosed and both Argue and Marcar are set to relocate and join the Walmart Labs team in Silicon Valley.

Elsewhere, social bookmarking startup Trunk.ly has been bought by AVOS Systems, which is run by YouTube founders Chad Hurley and Steve Chen.  Hurley and Chen recently re-launched Trunl.ly's main competitor Delicious.com. Trunk.ly, founded in December 2010 by Melbourne-based Tim Bull and New Zealand-based Alex Dong, offers users the ability to bookmark social media activities such as "Like" on Facebook and Twitter tweets. Under the terms of the deal, Trunk.ly will now be folded into Delicious and Bull, a former computer systems architect with PricewaterhouseCoopers, said that he and Dong were looking forward to working with AVOS to resurrect the flagging fortunes of Delicious.

Hurley and Chen acquired Delicious from Yahoo in April and relaunched the service in September. At the time they said the social bookmarking service would need to be rebuilt from the ground up and the two have now evidently found the right people for that job in the Trunl.ly team.

Sensis

Telstra's directories arm Sensis has further reduced its workforce and by all accounts there is more of that in store as CEO Bruce Akhurst continues to guide the business towards a digital future. With consumers moving online for their business queries the existing Yellow Pages business is just not what it used to be and Akhurst understandably announced the push to realign the business to focus on digital services. He then said at Telstra's full-year earnings presentation in August that the overhaul would start to bear fruit in another three years. To meet that deadline Sensis needs to cut its costs and the most viable way of doing that is by the most expensive factor in the overall equation, labour.

There are many out there who reckon the three year timeline suggested by Akhurst may be a touch ambitious given the online environment is far more competitive, and generating the sort of revenue per customer usually seen in the traditional model may be easier said than done. According to Credit Suisse, Sensis will need to compete in the online space with the headwind of a higher cost base and that creates difficulties because a move to online operations generally means an erosion in revenues.

One major area of focus for Sensis is the SMEs (small to medium-sized enterprises) market, which could potentially generate a healthy new revenue stream.The idea is to create a one-stop advertising solution for SMEs who are still new to the online space, however, there are concerns among some quarters that eventually small businesses may choose to cut Sensis out of the picture once they become more comfortable with life online. That could pose an enormous risk to Sensis and potentially threaten its position as a major contributor to Telstra's overall business.

There has been talk from time to time about Telstra selling Sensis but for now the questions about who would buy it and at what price remain.  According to UBS analyst Richard Eary, Yellow Pages is a difficult space to be in and the problem is that it's a very cash generative business.  

“You don't necessary want to chuck the baby out with the bathwater which I think is what (Telstra) is trying to get its head around,” he said.

“As a consequence of that they may be thinking, do we actually manage the business and keep the billion dollar of cashflow in the business, because if we keep it for five years it's probably worth more than what someone is going to pay for it.”

Local wrap

In other local news, Ninemsn, now rebadged as Mi9, has unveiled an ad exchange of its own to take on the primacy of Google with the launch of the Microsoft Advertising Exchange.  The exchange will be the second real-time bidding advertising exchange in the country and Ninemsn boss Mark Britt said the exchange will be pitched at a different category of advertiser, one who will be keen to purchase premium inventory across Mi9's portfolio of sites.

Meanwhile, Computershare has cleared a major hurdle in its bold expansion plan with the company obtaining US anti-trust clearance for its takeover of the Bank of New York's Mellon Corporation.

Elsewhere, financial services technology company Santapau Limited, has undertaken a rebranding to develop new company Infinitive Limited after the acquisition of Pisces Group, and US-based Triple Point Technology has finally acquired local mining software solutions provider QMASTOR.

Yelp

Moving to overseas news, Groupon's successful IPO looks to have apparently persuaded one San Francisco-based online consumer-review company Yelp to test the IPO waters, with reports that the company is planning to go public in early 2012. The company, started in 2004, has reportedly picked Goldman and Citigroup to lead the initial public offering next year but there are no formal plans in place just yet. If Yelp does indeed move to list it will be interesting to see just how many shares it will choose to offer.

According to the Wall Street Journal, the offering may value the company at as much as $US2 billion and it's fair to assume that Groupon may provide the template to how Yelp pursues the float.

There are actually interesting parallels between the two, Yelp was also at one time on Google's radar and reportedly rebuffed a $US500 million offer from the internet giant two years ago.   

Just like Groupon, the US advertising market is getting more competitive for Yelp and Google's recent purchase of Zagat is another sign that it's ready to increase its presence in the segment.  

Yelp has also faced its share of critics who have accused the company of strong arming businesses into advertising with it with threats of poor reviews.

Perhaps, a clearer indication of when and how Yelp decides to join the IPO bandwagon will come with the float of rival Angie's List Inc.  The company is seeking to raise up to $131 million for a stake of up to 20 per cent that values the company at up to $US641 million. It posted revenues of $US62.6 million for the first nine months of 2011, according to its public filing, while Yelp's revenue is tentatively seen to be somewhere around the $100 million mark by 2012.

Yahoo

Finally, private equity operators KKR and TPG Capital are reportedly looking to buy a 20 per cent stake in Yahoo.

According to Reuters, the firms have signed confidentiality agreements with Yahoo and could be willing to team up with its co-founders Jerry Yang and David Filo to buy a minority stake and then move to take full control once the leverage finance market opens up.