Why is Seek different to Carsales and ninemsn?

So why is Seek different to Carsales and ninemsn.

James Packer has recently completely his astoundingly well-timed and well-structure $4.5b spin-off of some key PBL assets. Into the private equity joint entity goes a raft of goodies, including TV (licences, premises, business), magazines, and some online properties. Specifically, these are the PBL stakes in ninemsn and carsales. The 27% stake in Seek (recently increased from 25%), however, has been kept out and is still fully in the possession of Packer.

There are a number of possible explanations for why this occurred. The one quoted in the Australian Financial Review today (sadly I can't link to it) is that Foxtel and Seek are not controlled and hence were not included. Whilst the facts behind this remark are true, in the world of private equity deal-making anything is possible for the right amount. However, let's assume that for simplicity PBL chose this route. Consider, though, that ninemsn is only 50% owned by PBL, so control is debatable.

Another option is that both ninemsn (heavily) and Carsales (more loosely) are associated with other parts of PBL - although ninemsn and Seek (and Carsales) are also now linked together in marketing deals.

It is still worth considring how Packer is likely to feel about the outcome, and whether Seek has a better business and/or future than the other two. As such, it's worth examining this.

Ninemsn was always going to go. It is inextricably linked to the Nine Network (free to air television) and draws its online content almost extensively from television content. Plus there is the "integrated marketing" opportunity to sell to advertisers. Putting Ninemsn and the Nine Network into separate entities would have required a complex arrangement around licencing, promotion and revenue share, so this decision was logical. In terms of the promise of Ninemsn, this is a dominant local media site that is benefitting from the explosion in online advertising. Packer Snr opportunistically brought ecorp back into the fold a few years ago and Ninemsn has been a jewel since then. It doesn't generate huge amounts of revenue, but the changes is media CONSUMPTION mean that it may well do so in future. Depending on the price CVC paid for it (overall multiple is reported at around 12x for the whole lot), Ninemsn may be a wonderful pickup.

Carsales and Seek make for a more interesting comparison. They're both local, both classifieds, and have both taken on and defeated (for now) traditional print media publishers. Yet one is being put into the vehicle and one isn't. It is possible that Packer preferred to keep both out and was under pressure to include at least one (he is known to love new media but the pressure to include the "controlled" carsales seems to have been strong), but then the question still remains as to who got the better deal with Seek out.

Here are some possible considerations as to why Packer may have the better deal:
* Seek is in a bigger overall market - definitely correct; employment is the biggest of the classified spaces (a fact not lost on the Bassat's when they chose the category)

* Seek has more "vertical integration" opportunities - for example, Seek Learning is within the general space but outside classifieds. This expands AND diversifies revenue.

* Seek is more dominant than Carsales in it's own market - true at present, although competition is online employment is really heating up, especially from News Interactive

* The Seek platform is better for future expansion and line extension - possible but unknown and probably debatable (certainly the online experience is NOT markedly better, as Global Reviews Employment and Car Classifieds Website Benchmarks show)

* Seek has a better management team - They are definitely good but Carsales also has a proven track record so this is less likely to be a factor

* Seek makes more money, and will grow revenue faster than Carsales - it might simply come down to that, as both free cashflow at Seek as well as NPAT are remarkable

The real question that plays on my mind, though, is this: Notwithstanding the last point above, why did the CVC guys let Packer keep Seek out of the mix. Surely it's at least as attractive as carsales and ninemsn, so one can only assume that either they don't really get it, or they were so keen to "partner" with PBL that they accepted these terms.

Either way, one of the two parties is going to be smiling a broad smile in three years time. If I had to make a prediction I'd say there is a real possibility that private equity will become Packer Jnr's Alan Bond, and the Seek component will just be the icing on the cake.

Doesn't One.Tel feel like a long time ago now!