Telstra Selling SouFun Stake to Apax and General Atlantic

SYDNEY (Reuters) – Australia’s Telstra Corp Ltd (TLS.AX) has agreed to offload its stake in SouFun, China’s second-largest online real estate website, to two private equity firms and existing shareholders for around $400 million ahead of a float.

Telstra said on Friday private equity firms General Atlantic and Apax Partners APAX.UL and two SouFun shareholders had agreed to effectively underwrite its stake in the Chinese firm which is preparing for an initial public offer later this year.

Telstra, Australia’s biggest phone company, said in a statement that the two firms and shareholders had agreed to buy up any shortfall of shares in the business’s IPO, or to purchase its entire stake.

The agreement values Telstra’s 51 percent stake at more than $400 million, or $810 million for the entire company.

A banking source told Reuters that the deal meant Telstra would sell its stake outright, while about 25 percent of SouFun would go into the IPO and the rest would be sold to strategic and institutional investors.

SouFun founder and internet entrepreneur Vincent Mo owns 30 per cent of the business

The valuation applied to the agreement was less than a valuation of around $1 billion analysts and sources involved in the float have previously flagged but well above the valuation of around $500 million when Telstra purchased its 51 percent stake in 2006.

Sources told Reuters last month that SouFun was preparing for a U.S. IPO worth up to $300 million, in what could be the largest such listing by a Chinese Web company this year. [ID:nTOE66M03L]

Deutsche Bank, JPMorgan Chase & Co (JPM.N), Bank of America Merrill Lynch (BAC.N) and UBS AG (UBSN.VX)(UBS.N) are working on the deal, banking sources said.

Telstra wants to list SouFun on the New York Stock Exchange by October, one source said Friday.

At the time of its purchase, Telstra said SouFun Chief Executive and founder Vincent Mo would remain a significant shareholder, while remaining shares would be held by management and venture capital firm IDG.

SouFun covers 104 Chinese cities and has 20 million registered users, according to media reports. It competes with market leader China Real Estate Information Corp (CRIC.O), which raised $216 million in a Nasdaq IPO last October.

Telstra on Thursday warned 2011 earnings would decline sharply, sending its shares down 9 percent. [ID:nSGE67B02D].

Telstra did not return phone calls seeking further comment.

By Michael Smith
(Additional reporting by Doug Young in Hong Kong; Editing by Ed Davies)