PRG directors say 'reject Cullen offer'

By Phil Boeyen, ShareChat Business News Editor

Friday 26th October 2001

Pacific Retail Group (NZSE: PRG) shareholders are being advised by the independent directors to reject the takeover offer from Eric Watson's company, Cullen Investments.

The committee of PRG independent directors have made the recommendation based on an independent advisor's report which suggests a fair value for the company is $2.54.

"We regard this price as "fair", as it reflects the underlying assets of the company, but also allows for the lack of liquidity and "minority" nature of the shares that are currently held by shareholder's other than Logan," the report says.

"In this context therefore we regard the Logan offer for the shares as unfair. This is however not to say that shareholders will benefit from a better offer than the one currently made by Logan."

Logan is offering $1.76 for shares in the listed retail company, a 32 cent premium on the stock's pre-bid price of $1.45 per share.

Despite the advice that shareholders reject Logan's offer the committee is recommending that shareholders read both the target company statement and the independent advisors report in their entirety.

Cullen Investments meanwhile is taking further its concerns with the PRG appraisal process which it first made public on Thursday.

"While Logan's immediate interest is the effect of the appraisal on its offer, our concerns are more general, inasmuch as the projections on which the report is based may now form the basis of market expectations of the company's future performance," says Cullen boss, Phil Newland.

"It is utterly inappropriate that the company should have been placed in this position without the base information being scrutinised and the projections adopted by the full board."

Mr Newland confirmed that the company will not vary its offer and is considering asking the Takeovers Panel to consider and comment upon the matter.

Cullen says it has received acceptances that would lift Logan's holding in PRG to over 73%, up more than 10% on the 63% it held pre-bid.

Mr Newland said yesterday that he is unhappy that the appraisal used three-year projections for the company which had not been through a board review.

"For an appraisal model to rely on three-year projections which are not the product of a detailed and thorough review by the board raises obvious questions about the integrity of the valuation process itself, and hence its output."

Many market analysts have commented that they too consider the Cullen bid undervalues PRG, which is looking to improve its recent profit results through expansion of its core business and a move into gift and homewares retailing.

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