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Masthead ups Vertex Offer as new Bidder Prowls and Withdraws

By Simon Louisson of NZPA

Friday 22nd April 2005

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Firstly, Masthead, the investment vehicle of the Stewart family of Christchurch, upped its hostile takeover bid by 15c to $2.05 a share -- valuing the company at $65.6 million.

In rejecting the new bid as "insufficient" and not fair or reasonable, the indpendent directors, chairman Tony Frankham and Sandy Maier, revealed a new bidder was stalking Vertex.

Within hours of that revelation, the mystery bidder pulled out of the running.

The committee recommended shareholders not accept the Masthead offer and stood by that even after the mystery bidder pulled out.

Vertex shares gained 16c to $2.01.

In the committee's first statement, Frankham for the committe said it had received approaches and had discussions with two other parties.

The market was told of one of those last month without the party being revealed. Speculation had it as Australian packaging giant Vissy. After completing due diligence it pulled out on April 8.

The second unidentified third party initially requested due diligence. Frankham warned there was no assurance another would be forthcoming and that proved to be the case.

But he advised shareholders not to rush to accept any offer and wait until Masthead's offer closed on May 17 before committing.

The committee had been in intense discussions with Mark Stewart of Masthead to try and presuade the predator to lift its offer closer to the $2.14-2.39 range that independent valuers Grant Samuel considered Vertex to be worth.

The committee said "an appropriately priced takeover offer" would be preferable to a continuation of the status quo which has involved a board (including Stewart and associate Warwick Webb) that can't agree and resorted to the courts to resolve matters.

However, Frankham said the committee and Masthead had been unable to agree on a share price that Masthead would offer and the committee would recommend.

The committee noted the $2.05/share offer price was the same value as Masthead paid George Gould interests for its 19.9% interest in September.

Stewart called the Grant Samuel valuation "blue sky". He said $2.05 was fair as it was the same price the shares were issued at in 2002 and the company had since shown dysfunctionality.

Frankham said however, Vertex had reported an improved performance recently and budget expectations for the year to March 2006, referred to in the Grant Samuel report, showed a continuing improvement.

Masthead rejected the committee attempts to persuade it to include a 4c dividend in its offer price to bring the price up to $2.09, or even to declare a another dividend to use up imputation credits.

"The current bid price does not reflect such a premium," Frankham said. "The committee believes Masthead has the capacity and ability to increase their offer to that level at least."

The committee believes Vertex has a strong future as an independently operated entity and has no need to be merged with Masthead's plastics company, Alto Plastics, as Masthead wants.

Frankham said, in the absense of another bid, shareholders not wishing to be locked in to a minority position, could sell on market or accept the Masterhead offer.

Masthead's offer is conditional on winning 50 percent control.

"In any event, should Masthead's offer be declared unconditional, we would recommend shareholders accept at that time to avoid becoming locked into an unsatisfactory minority position."

Masthead had said it would demand the resignation of managing director Paddy Boyle and Maier if it won 50% control. Both publicly opposed Stewart and Webb's appointment to the board, saying they are conflicted because of Masthead's ownership of Alto.

Frankham said the committee had sought assurances from Masthead that any such dumping would be negotiated through a remuneration committee of the board, but Masthead had given no such assurance.

Frankham also sought Stewart and Webb pay their own legal costs over litigation against Vertex but "no such agreement has been forthcoming"

Masthead has so far only picked up another 2% of Vertex.

Stewart said brokers had advised that $2.05 was the price investors expected for their shares.

He noted that since Masthead's first made its offer on March 1, the market had dropped over 9%.

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