Australian automotive aftermarket parts company Bapcor Ltd lifted its stake in NZX-listed Hellaby Holdings Ltd another 1.2% to 48.7% in the week to 4 January, even though Hellaby’s independent directors continued to argue full takeover was likely to result in sale of the non-automotive parts of the business at less than optimum prices.
Bapcor made it plain when it launched its offer in September that its target was Hellaby’s automotive parts business and that it would sell other divisions. Hellaby’s independent directors told shareholders on 20 December: “This [selldown] would be at a low point in Contract Resources’ trading history and before the restructure of Footwear is completed. In recent years, Hellaby has successfully sold, at the appropriate time, the packaging & equipment groups, realising full value for shareholders. The board believes that a carefully planned & controlled divestment process would be more likely to realise the embedded value of the Hellaby businesses and provide value of more than $3.60/share.”
The Hellaby board said that, if the Bapcor offer failed, it intended to immediately confirm an interim dividend in line with its existing dividend policy, as well as pay a special dividend to allow shareholders to benefit from the capital gain realised on the equipment group sale.
Bapcor’s offer is conditional on 90% acceptance, but it could declare its offer unconditional once it achieved majority control.
The independent Hellaby directors said this would introduce complexities, including material restrictions on related party transactions, and would affect independent directors’ duty to act in good faith & in the interests of the company as a whole [as the majority shareholder worked to sell assets].
Bapcor originally offered $3.30/share. Grant Samuel & Associates Ltd gave a valuation range of $3.60-4.12/share, which was also below the independent directors’ view of fair value.
The independent directors said Bapcor’s offer failed to reflect the full value of Hellaby and, in particular, its automotive group. They believed the automotive group had a standalone value of at least $350 million, excluding the significant synergies & other benefits that would be gained by Bapcor from a merger of the 2 businesses.
Bapcor had lockup agreements for just under 30% of Hellaby when it made its $3.30/share offer in September, 27.2% of that with Hugh Green Group and the balance with institutions. The market price then was $3.04, after rising from a low point of $2.45 in June. The price yesterday was $3.52.
2 November 2016: Hellaby independent directors reject Bapcor offer
27 September 2016: Australian auto parts company Bapcor bids for Hellaby
Attribution: Company releases, NZX.