Patrick Grove’s iBuy to acquire 3 daily deals sites, IPO in Australia

Co-authored and edited by Gwendolyn Regina Tan

Update on Dec 18: iBuy has successfully raised A$37 million ($33 million) in an oversubscribed IPO in Australia.

Malaysia and Singapore-based entrepreneur Patrick Grove is on a shopping spree where he will acquire flash sales businesses in Hong Kong, Singapore, and Malaysia through his company iBuy Group. It will then raise A$37 million ($33 million) at an initial public offering on the Australian Stock Exchange (ASX) before the end of this year. The proposed ticker is ‘IBY’.

These businesses will be purchased by iBuy in their entirety:

• Dealguru, which owns Deal.com.sg (Singapore) and Mydeal.com.my (Malaysia)
• Buy Together, which owns BeeCrazy.hk (Hong Kong)
• Dealmates.com (Malaysia), part-owned by Patrick Grove’s Catcha Group

The move was announced through an IPO prospectus (download it on iBuy Group‘s website). Dealguru is set to be purchased for $11 million in cash and $23.28 million in shares at the Offer price, Buy Together will be bought for $8.4 million in cash and $12.6 million in shares, while Dealmates will get $10 million in cash.

In Financial Year 2012, Buy Together generated A$37.1 million in gross turnover, while Dealguru made A$32.5 million and Dealmates A$3.1 million. In aggregate, the total number of orders made through these businesses rose from 68,000 in 2010 to 1.46 million in 2012, or a multiple of 21. After deducting payments made to suppliers, total revenues for these three sites stood at A$20.8 million ($18.9 million) in 2011 and A$41.7 million ($38 million) in 2012. Turnover and revenue figures for this year are set to equal or surpass the previous year.

However, consolidated historical figures show the businesses have been operating at a combined loss of A$3.95 million ($3.59 million) after tax in 2011, which was reduced to A$1.43 million ($1.3 million) last year. For the first half of 2013, the businesses lost A$53,832, which means iBuy could be looking at profitability in 2014 and beyond. iBuy has total assets worth A$89.5 million while liabilities stood at A$10.6 million.

The prospectus proposes that Catcha Group will own 25.1 percent of shares in iBuy, with Dealguru taking up 22.1 percent, Buy Together getting 11.9 percent, and the rest going to convertible note holders (8.2 percent) and new shareholders (32.7 percent). The total market capitalization would be around A$113 million ($100 million).

Patrick Linden, co-founder and CEO of Dealguru, will become the iBuy’s chief executive. Patrick Grove will become iBuy’s director and chairman.

Meanwhile, Dealguru’s food delivery business Food Runner, which Dealguru has a significant shareholding, will not be a part of iBuy’s future plans. The food delivery business will be sold back to Dealguru’s shareholders and will continue to be run by Food Runner’s CEO, Lance Frey.

Buy Together and Dealguru was founded in 2010, while Dealmates was started a year later.

iBuy’s decision to pick the ASX over equivalents in Singapore and Malaysia could be due to its relatively less stringent entry requirements. To do an IPO in the ASX, companies need to demonstrate A$3 million in net tangible assets or A$10 million in market capitalization if they do not pass the profit test. In Malaysia and Singapore, companies need a market cap of RM 500 million ($154 million) and S$150 million ($120 million) respectively if they are not profitable.

Furthermore, Australian institutional investors have a reputation for being more tech-savvy and open to buying shares in technology companies than their counterparts. Australia as a whole is generating far more e-commerce sales than Singapore and Malaysia combined ($31 billion versus $1.7 billion), despite only having four times the population size of Singapore and about seven million people less than Malaysia.