Shareholders in Synlait Farms should accept an $87.5 million takeover offer for the dairy company launched by a giant Chinese corporate, according to a recommendation by independent directors.
That recommendation comes after Chinese company Shanghai Pengxin Group last month announced a takeover bid for Synlait Farms, in association with two of Synlait’s founders, John Penno and Juliet Maclean.
The takeover bid at $2.10 a share is through the Pengxin, Penno and Maclean joint venture vehicle of SFL Holdings.
The offer opened on Friday and continues until December 6, though SFL Holdings may elect to extend the offer.
A committee of Synlait Farms independent directors, Stephen Howse and Barry Brook, have made the «unanimous» recommendation that shareholders accept the offer for all their shares in Synlait Farms.
The Synlait Farms board has also ordered and received an independent appraisal of the offer to distribute with the committee recommendation, to be mailed to shareholders.
The independent appraisal, by Grant Samuel, said its assessment of the value of Synlait Farms shares was in the range of $1.86 to $2.02. Thus the offer of $2.10 is above Grant Samuel’s assessed value for the shares.
The independent committee, in a statement, said the offer price represents full value for the shares in Synlait Farms, at a 4 per cent premium to the top end of the Grant Samuel range.
«In the 2013 audited accounts of Synlait Farms, the equity value of the company translated to $1.94 a share, prior to any transaction costs, and the offer is an 8 per cent premium to this,» the committee added.
When the takeover bid was made, one of the larger Synlait Farms shareholders, Ben Dingle, announced he had already decided to sell.
Penno, Maclean and Dingle have entered a lockup, agreeing to sell their 50.18 per cent combined stake in Synlait Farms, although Penno and Maclean will together buy back 26 per cent under the offer, with Shanghai Pengxin holding 74 per cent.
The stock has been on trading halt on the Unlisted market since October 8 and last traded at $1.60.
The committee said the offer allows shareholders to sell all of their shares, and achieve full liquidity for their investment.
Synlait Farms had been trading on the Unlisted trading platform since March this year, and since that time only 1.23 per cent of Synlait Farms shares on issue have changed hands.
It said the ongoing involvement of founders Maclean and Penno had provided confidence to SFL Holdings about the future performance of Synlait Farms and this has had a favourable impact on terms of the offer.
If the offer gets to a 90 per cent acceptance and there is delay in obtaining Overseas Investment Office consent or Chinese regulatory consent beyond December 31, the offer price will be raised.
The daily increase under the adjustment mechanism of $0.001957 would mean that if the offer was hypothetically declared unconditional on January 31 the adjusted offer price would be $2.1607 a share.
Source: Stuff