Classified ad seller Trader Classified Media said on Wednesday it is aggressively expanding in China with a two-year investment of about $193 million in online real estate listings business SouFun Holdings.

Amsterdam-based Trader Classified said it would take an initial 15 percent stake in SouFun for $22.5 million and added that the deal is likely to be its largest ever investment.

Beijing-based SouFun, founded in 1999, runs the biggest Web site in China devoted to real estate classified ads and has the largest database of online listings with more than 400,000 unique properties, Trader Classified said.

Additional fixed-price call options will allow Trader Classified to increase its stake to 100 percent in about two years for another $170 million, if the company stays in private hands. If SouFun goes public before then, Trader Classified would get a 45 percent stake for about the same price.

Its SouFun shares are preferred ones, further limiting the investment risk, Trader Classified Chief Executive John McCall MacBain said in an interview.

Trader Classified plans to launch a series of accompanying local SouFun print guides, a strategy it has used in other countries. SouFun expects to have a presence in 40 Chinese cities by the end of 2005, up from the existing 29.

SouFun had $10 million of revenue in 2004 and expects $20 million in 2005 with about $10 million of earnings before interest, tax, depreciation and amortization, MacBain said.

Trader Classified, whose shares are listed in Paris, also said it is boosting its stake in the Shou di Shou ad guides in China, paying another $2.5 million for an additional 15 percent to bring its total ownership of the publisher to 55 percent.

"In three to five years, China will be 10-20 percent of all Trader Classified worldwide revenues and maybe another 5 percent more than that in profits because the margins are higher there," said MacBain, who owns about 72 percent of the company's shares.

Trader Classfied, which publishes 578 print guides and runs 56 Web sites for shoppers in 22 countries, generates about 23 percent of its revenue from Russia and surrounding countries and another 21 percent from Spain and Latin America.

Its operating margin in 2004 was 28.3 percent.

The company's shares closed up 1.2 percent at 13.53 euros on Wednesday before the announcement. They are up 54 percent since this time last year compared with a 9 percent gain in the Dow Jones Stoxx Media Index over the same period.

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