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Fairfax Media is selling its remaining stake in New Zealand online auction house Trade Me in a move that will eliminate most of the company’s debt.

Investment bank UBS has been appointed to sell the 51 per cent stake in Trade Me to institutional investors at about $3.05 a share.

The deal will yield $616 million for Fairfax - publisher of this website - which paid $NZ700 million for the entire business in 2006.

Fairfax shares rose as much 6 per cent in early trade and were recently trading at 52.5 cents, up 1.5 cents or 3 per cent.

Fairfax Media's chief executive and managing director, Greg Hywood, said in a statement to the ASX this morning that the proceeds from the sale would "provide us with a very strong balance sheet and the financial flexibility to invest and complete the company's structural transformation".

"Our decision, at this time, to sell our remaining shareholding in Trade Me in no way reflects our view of Trade Me's future," Mr Hywood said.

"Trade Me’s strong performance has given rise now to an opportunity to reduce debt and provide greater financial flexibility. We have every confidence in Trade Me's ongoing strength and we wish it every success in the future."

Mr Hywood added that Fairfax Media had "learned a great deal more" about operating digital businesses since it acquired Trade Me in 2006.

The sale was also confirmed in a Trade Me announcement on the NZX this morning.

‘‘Trade Me understands that the book build being undertaken in connection with this sale is continuing,’’ company secretary Linda Cox said in a statement.

‘‘Trade Me Group Limited has requested and NZX has confirmed that a trading halt is in place in respect of Trade Me until the book build is completed. Trade Me has also requested a trading halt on ASX.’’

The company confirmed that when the sale is completed, Fairfax Digital NZ would no longer be a shareholder of Trade Me.

It is believed the sale is designed to take advantage of Trade Me’s strong market performance since being spun off as a separate listed entity in December last year at $2.07 a share.

Independent media commentator Peter Cox said while Trade Me had a big market share in New Zealand its rate of growth was slowing in a maturing market.

''Though I agree that you are looking for businesses for the future that are internet-based where there can be high rates of growth, I would suggest that this one has probably seen its best days now,'' Mr Cox said.

''Therefore if they can get what they feel to be a very good price for it, then definitely they should consider selling it.''

Mr Cox ran unsuccessfully for a seat on the Fairfax board at November's annual meeting.

Fairfax's full-year accounts said Trade Me had a ''somewhat variable performance'' over the second half of 2011-12.

Fairfax sold 34 per cent of its Trade Me stake into the public offering and offloaded a further 15 per cent in June this year.

That June sale of its Trade Me stake netted Fairfax $422 million, most of which was used to pay down debt.

Shares in Trade Me, which dominated New Zealand's online auction market, now trade at more than 20 times the company's expected earnings for the current financial year, according to Bloomberg.

Fairfax reported net debt of $815 million as at June 30 this year, excluding $99 million of debt associated with Trade Me, and the company reduced its net debt by $574 million last financial year.

Last month, Fairfax sold its US agricultural media business for $US80 million cash, which was also used to pay down debt.

Should the Trade Me sale be finalised this week, then Fairfax Media's net debt - which stood at $2.5 billion in 2008 in the wake of the Rural Press merger - should fall below $200 million.

The Trade Me sale has the support of some of Fairfax's major institutional shareholders, including Allan Gray, Lazard and Maple-Brown Abbott. Representatives of the company's largest shareholder, Gina Rinehart, also reportedly said Ms Rinehart supported the transaction.

The sale will, however, deprive Fairfax of a key source of digital earnings, as the business implements a new digital strategy in 2013 amid a tough advertising market.

At the company's shareholder meeting in October, Fairfax chief executive Greg Hywood reported that revenue for September and the first few weeks of October were 7.5 per cent below the corresponding period for the prior year. He said ''it is impossible to make projections from here'', but added that the company was managing these structural and cyclical challenges.

This year, Fairfax announced plans to cut more than 1900 staff and take about $235 million in structural costs out of the business. This includes plans to close its largest print plants in Sydney and Melbourne, turning The Sydney Morning Herald and The Age into compacts, and introducing a metered model to charge digital subscribers for access to these mastheads.

At the shareholder meeting, Fairfax chairman Roger Corbett said a break-up, or demerger, of the core media business was ruled out after detailed analysis as it would not add to shareholder value, and would undermine future value creation.

Media companies continue to do it tough. Ten announced a $230 million capital raising earlier this month - its second since June - as advertising revenue continued to slump. And last week, APN News & Media shares hit record lows after it said underlying earnings for the current year could be down 34 per cent from the previous year if current trends continued.

With AAP and Glenda Kwek