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Alesco Corporation

By Dan Stratful (AFA)

Tuesday 24th July 2012

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DuluxGroup, which itself was de-merged from explosives company Orica, has launched a takeover bid for Alesco Corporation (ASX: ALS) during a cyclical low in ALS's earnings cycle, which means Dulux will potentially pay a lower price for ALS.

Dulux, which made a takeover bid of $2 per ALS share several weeks ago, has raised its bid to a total value of up to $2.23 per ALS share.

In the original Target Statement, ALS's Directors' reported that the offer was highly conditional, inadequate and does not reflect fair value for the company so Directors unanimously recommended shareholders reject the offer.

The Independent Expert concluded in the Target Statement that Dulux's offer is neither fair nor reasonable and it assessed the value of ALS's shares at between $2.23 to $2.52, while the original $2 offer was also 15% below the average broker valuation of $2.34.

Dulux's first bid obviously comes when ALS is going through the bust phase of its business cycle, and to counter the takeover bid, ALS has released its results for the year ended 31 May 2012 (FY12).

FY12 net profit (before significant items) came in at $11.3 million - ahead of initial guidance of $9.9 million to $10.7 million provided in January 2012 - while significant items totaled $25 million (including $4.4 million in costs related to the Dulux takeover offer).

After the inclusion of significant items, ALS has reported a FY12 loss of $13.9 million, down from a profit of $13.6 million in FY11.

The result reflects tough trading conditions in the Australian construction markets particularly in 2012, however ALS did make positive progress on its net debt position which reduced to $66 million at the close of FY12 (gearing 14%), from $78 million (gearing 15.3%) as at the close of FY11.

In response to Dulux's revised ‘best and final' offer of up to $2.23 per share (consisting of a cash offer of $2.05, and up to 18 cents in franking credits), ALS has again advised its shareholders to REJECT OFFER.

While shareholders, in theory, should always listen to their directors they also have the chance of SELLING their shares on market, which are trading at a 43% premium to the last sale price before the original $2 takeover offer was made.

About Alesco Corporation
ALS supplies branded products to the Australian and New Zealand building products markets and it is Australia and New Zealand's largest manufacturer of garage doors and openers. ALS is also a leading manufacturer and distributor of products and equipment to the concrete and construction markets, and a leading supplier and distributor of windows, doors and glazing products.

Status: REJECT OFFER

ALS's shares today traded at $2.02

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