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AMP dismisses Mainfreight offer as too light

By Duncan Bridgeman

Friday 17th October 2003

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Investment bank AMP Henderson was yesterday undecided whether to accept Mainfreight's takeover offer for Owens Group but indicated the price tag of $1.10 a share was too light.

"We've got until the end of the month but we sort of feel that $1.10 is a bit on the light side," said Nat Vallabh of AMP Henderson, which holds 10.7% of Owens.

The takeover is conditional on Mainfreight acquiring 90% of Owens by October 31. The company currently has 57.5% acceptances with several key Owens family shareholders understood to have already accepted the offer.

Mr Vallabh said the Owens family held about 35% of the company and he believed there were still some family members who had not yet responded.

"But I think we also have to be mindful of the industry's future. Toll [Holdings] will be an aggressive competitor and Owens as a standalone business is going to be under a bit more competition than in the past."

A merger of the two road transport competitors is viewed partly as a defensive measure against increased competition from Australian-based Toll Holdings with its takeover bid for Tranz Rail.

The two trucking companies are concerned Toll, with a market capitalisation of more than $2 billion, will dominate the industry if Tranz Rail is successful.

Toll's bid, however, has hit a roadblock, with two institutional investors and a number of small shareholders rejecting its offer.

On Wednesday, Guardian Trust Funds Management said it was looking to increase its 3% shareholding in Tranz Rail in defiance of the Toll bid, also at $1.10 a share.

Toll has 83.5% and has extended its offer to November 7 to try to reach 90%. If Guardian prevents that happening Toll will be forced to make another takeover offer or buy shares on the market under creep provisions.

Both Toll and Mainfreight were forced to increase their respective offers following independent appraisal reports.

In Mainfreight's case its offer is just inside the $1.09 to $1.27 a share valuation by Deloitte Corporate Finance and the Owens board said it would accept the bid.

The relationship between the two companies was earlier strained when Mainfreight complained to the Takeovers Panel about a lack of information from Owens on trading since its sale of Hirepool in May.

Mr Vallabh said decisions on takeover acceptances were usually left to the last minute and AMP would weigh up the situation in the next week before deciding.

"If Mainfreight was to remove the 90% cap I'm still not sure there is any merit in holding out."

The combined market capitalisation of the two companies is less than $160 million.

Owens will be delisted if Mainfreight is successful.

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