Telstra pays $386M for Chinese real estate site

Buy is part of plan to move directory business beyond Australia

Telstra has paid US$254 million (NZ$386 million) for a controlling stake in SouFun Holdings Limited, which runs one of China's largest real-estate and home improvement websites.

Telstra, Australia's largest telecommunications company, now owns a 51% stake in SouFun, and plans to use the acquisition to beef up its advertising business in China. SouFun makes money by selling advertising on its website. Telstra's advertising arm, Sensis, will help manage SouFun going forward, the companies say.

The deal is also part of a broader plan by Telstra to expand its Sensis business beyond Australia and carry its intellectual property and management expertise to new areas, the company says.

The founder and chief executive officer of SouFun, Vincent Mo, will remain in charge and retain his 30.9% share of the company. SouFun's management team will remain in place after the deal, the companies say.

SouFun, which is already cashflow positive, is expected to post revenue of A$52 million (US$39.7 million) in 2007, with a profit of A$18 million after excluding income tax, depreciation and amortization, according to the companies.

Disclosure: IDG News Service is a member of the IDG group of companies, which includes IDG Ventures, a US$1.4 billion venture capital fund which holds a 14.7% stake in SouFun. Under the recent buyout of IDG New Zealand by Fairfax Business Media, Fairfax continues to have access to the IDG News Service.

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