By Jenny Ruth
Thursday 28th April 2011
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Ballylinch's 67.5 cents per share partial takeover offer for Tourism Holdings is highly unlikely to be successful in its current form, says Jason Familton, an analyst at First NZ Capital.
He values the shares at 92 cents and has raised his 12 month target price to that level from 83 cents previously, removing his 10% discount relating to the uncertainty around the company's earnings recovery. "We continue to see deep value in Tourism Holdings," he says.
"We anticipate the directors will recommend to reject the offer and that the independent appraisal report will come out with a valuation range significantly higher than the current offer," Familton says.
Ballylinch owns 19.14% of Tourism Holdings' ordinary shares (equating to 18.4% of the company which also has 4.22 million redeemable shares issued to senior management) for which it paid $11.1 million or an average price of 59.5 cents per share. Its sole director, John Grace of Sterling Grace, bought the stake from Sterling Grace on April 14.
Familton estimates Sterling Grace bought the stake at an average price of about $1.82 per share.
He estimates a successful offer would need to be priced between $1.05 and $1.15, including a premium for control.
"A competing offer cannot be ruled out at this stage (as the bid is likely to draw attention to the significant value on offer by Tourism Holdings) although, given the blocking stake that Ballylinch currently has, the competing offer would have to be at an appropriate level to convince them to accept for it to be successful unless, of course, it was also a partial offer."
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