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Hellaby urges shareholders to reject Bapcor offer 'significantly below' valuation

Tuesday 1st November 2016

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Hellaby Holdings is urging shareholders to reject a $322.5 million takeover bid by ASX-listed Bapcor, saying it's "significantly below" its independent adviser's valuation range. 

Grant Samuel valued Hellaby shares at $3.60-to-$4.12 apiece, above the $3.30 offer put forward by the Preston, Victoria-based company Hellaby said in its target company statement. The NZX-listed company's independent directors said the offer didn't reflect the full value of the business, and the automotive unit in particular. 

"The independent directors believe the automotive group has a standalone value of at least $350 million, excluding the significant synergies and other benefits that would be gained by Bapcor from a merger of the two businesses," they said. "In addition, the independent directors believe the offer price does not fully value Hellaby's other groups, resource services and footwear, or reflect the considerable opportunity for future profitable growth under Hellaby's recently communicated group strategy." 

Bapcor approached Auckland-based Hellaby earlier this year to buy the automotive business which was turned down, with the New Zealand company's board viewing the unit as "a very valuable and important part" of its new investment strategy, which has seen it shrink its focus to being a long-term investor in the automotive and resources services sectors.

Grant Samuel valued Hellaby at between $352.2 million and $402.7 million, a premium to its current market value of $326.4 million, or $3.34 a share. The company's automotive unit is valued at between $285 million and $313.5 million, the resource services group at $123.8 million-to-$141.5 million, and the footwear division between $26 million and $30.3 million. 

Hellaby also provided earnings guidance for the automotive unit, saying it expects trading earnings before interest, tax, depreciation and amortisation of $31.1 million in the year ending June 30 from $26.8 million in 2016. That's projected to rise to between $35 million and $40 million in 2018. Group trading ebitda from continuing operations is projected to rise to $53.5 million in 2017 from $34 million and the company said it expects trading profit to be "significantly ahead" of the 2016 year. 

Grant Samuel's report said the takeover bid wasn't surprising because Bapcor had already expressed interest in the automotive unit, and the fact that it raised A$165 million before embarking on the takeover provided an "added incentive" to achieve "a successful outcome to the proposed transaction". 

The offer has already secured almost 30 percent through lock-up deals with Salt Funds Management, Accident Compensation Corp and Hugh Green Holdings’ Castle Investments, however Grant Samuel notes ACC had only committed 750,000 of its 9 million shares, which "may indicate a desire for a higher price", something Bapcor chief executive Darryl Abotomey hasn't ruled out.

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