In This Article:
* Shift a response to call from Elliott to sell AutoScout24
* CEO plays down tensions with activist investors
* Strategy tweak to deliver 200-300 basis points in margin gains
* Can handle leverage ratio of up to 3.5 for buybacks - CEO (Updates with CEO comment on leverage, context, link to Breaking Views commentary)
By Alexander Hübner and Douglas Busvine
MUNICH, Aug 13 (Reuters) - German classifieds group Scout24 said on Tuesday it would explore a sale or spin-off of its autos platform and borrow more to buy back shares, after facing calls from activist investor Elliott to boost shareholder returns.
The strategic review marks a concession to Elliott's demand to carve out and sell AutoScout24, which sources close to the U.S. fund say could fetch up to 2.5 billion euros ($2.8 billion).
"We can consider a range of options for AutoScout24 and will examine these with an open mind. These could include a sale or spin-off," CEO Tobias Hartmann told Reuters at Scout24's headquarters in suburban Munich.
Elliott, in a letter published last week, also urged Scout24 to expand a proposed 300 million euro buyback of stock, saying its share price could top 65 euros if management acts decisively to boost returns to shareholders.
In response, Hartmann told analysts on an earnings call that Scout24 could afford higher long-term leverage - of up to 3.5 times core earnings - to support greater capital return to shareholders.
Shares traded steady at 52.45 euros on Tuesday, up 14% over the past year and valuing the business at 5.6 billion euros.
Hartmann played down talk of tensions with investors calling for faster change at Scout24, which runs Germany's leading property portal and whose autos operation is present in Germany, Italy, the Netherlands, Belgium and Austria.
"Our ideas and those of our investors are not that far apart," said Hartmann, who joined Scout24 last year from meal-delivery group HelloFresh.
He pointed to a strong operational performance, with group revenue gaining by 20% in the first half, as Scout24 confirmed guidance for revenue to expand by 15%-17% this year, with core profit margins at 52%-54%.
Hartmann said an overhaul announced on July 19, to structure Scout24's property and autos operations as two separate verticals, could expand group operating margins by 200 to 300 basis points by 2021.
BIGGER BUYBACK?
AutoScout24 is the smaller and faster-growing of Scout24's properties, billing itself as the top automotive marketplace in the European Union although in its German home market it lags eBay's mobile.de.