Nine to sell group buying venture Cudo for $60 million, report claims

Nine Entertainment is looking to sell off its group buying venture Cudo for more than $60 million less than a year after it was first launched, new reports suggest, in a move that highlights the explosive growth of the local web deals industry.

The group is also looking to float insurance plan aggregator iSelect.com.au which could be valued at $500 million, according to the Australian Financial Review.

The report claims Macquarie Group has distributed an information memorandum to potential buyers of Cudo, including group buying giants Groupon and Living Social, along with Yahoo!7, which owns Spreets.

Cudo chief executive Billy Tucker was contacted for comment this morning, but was unavailable prior to publication.

Cudo currently has about a 15-16% share of the market, according to Telsyte senior research manager Sam Yip, suggesting the $60 million price tag could be about right.

“I think this is a reasonable amount given Cudo’s position in the market and their share,” he says. “But I think the real challenge is expansion.”

“The other big players around them are rapidly growing as well, some looking at revenues well in excess of $10 million per month. But in terms of a price, with about a 15% share of the market the $60 million figure makes sense.”

The group buying market has exploded over the past year and analysts believe some consolidation was inevitable, even among the big players. Cudo was founded last year in a joint venture between Microsoft and Nine Entertainment Co with a reported investment of $800,000. It attempted to create a point of difference through a combination of web marketing and television ads.

Billy Tucker has also been a vocal presence in the group buying community, writing a regular blog with posts on the industry.

Yip says that in order for new owners to grow the business, they will need to pay attention to industry trends, which include expanding into new niches and categories as consumers begin to grow weary of a “one size fits all” approach.

“It’s about expanding into different locations and integrating new types of technologies into group buying payments.”

Meanwhile, the same report claims Nine and Microsoft are looking to downgrade their investment in iSelect with a float. Both bought their stake in 2007, while private equity firm Spectrum Equity Investors purchased 10% of the company for $30.2 million earlier this year, providing it a valuation of over $300 million.

The AFR report claims that any money gained from a sale of either business would not be put towards paying down debt.