Taylors Group, one of New Zealand's longest NZX-listed companies, could soon disappear after majority owner Australian-listed Spotless Group yesterday launched a takeover bid.
Spotless Group wants the third of shares it does not already own in the laundry and related services company. If it is successful, Taylors will be delisted from the NZX after 25 years.
Spotless, which owns 66% of the shares in Taylors, said it had given formal notice under the Takeovers Code of its intention to make a cash offer for the remaining Taylors shares.
The intended offer price was $2.08 cash per Taylors share. Taylors shareholders would also remain entitled to receive the 7c per share fully imputed final dividend, implying total value to Taylors shareholders of $2.15 per share, Spotless said.
However, ABN Amro Craigs broker Chris Timms said the offer did not seem to be enough - on the face of it.
Taylors, first listed in 1974, had always been regarded as a good income stock, paying a dividend yield of about 10%. Spotless took its majority stake in 1991.
The company had net debt of only $2.5 million and, last year, paid back $18 million of debt from operating cash flow. Profit was stable through a recession.
"You have to wonder why, when people are looking for a company to pay income during a recession, they would want to exit at this point."
Of the 24 million shares on issue, eight million were in minority shareholder hands. The shares were tightly held, last trading at $2 a share for 250 shares.
"People hold Taylors for income. If they sell, what will they do with the money? To me, it's not a compelling offer," Mr Timms said.
Spotless chairman Peter Smedley said that after holding the 66% shareholding in Taylors for more than 10 years, an acquisition of the minorities in Taylors was a sensible step for Spotless.
For Taylors shareholders, the opportunity to receive a significant cash premium for their shares was highly attractive, particularly given the relatively low liquidity of Taylors shares, Mr Smedley said. Spotless was seeking a unanimous recommendation from the independent directors of the Taylors board, and expected to proceed with the offer only if such a recommendation was made.
Taylors' independent directors would obtain an independent adviser's report in relation to the offer, before making a formal recommendation to Taylors shareholders as part of their target company statement.
The $2.15 value per Taylors share represented a substantial premium for Taylors shareholders, Spotless said.
It was a 22% premium to the volume weighted average price of Taylors shares traded on NZX during the month ended on August 24. Conditions on the offer include Spotless receiving sufficient acceptances to increase its shareholding in Taylors to at least 90% and Overseas Investment Office approval.
