Dorchester closes $30 million capital raise, applications exceed offer

Friday 24th October 2014

Dorchester Pacific, the finance company midway through a takeover for Turners Group, has closed its $30 million capital raising saying the offer was oversubscribed.

The Auckland-based company issued the new shares as part of its takeover of the auction group, which saw major shareholders pre-commitment scaled back to $8 million from a previous $10 million, it said in a statement. The takeover offer gives Turners' shareholders either $3 a share in cash, two-year notes that pay interest of 9 percent and convert to Dorchester shares,ordinary shares of Dorchester, or any combination of the three.

The finance company is looking to acquire the car auction house to complement its loan book, of which 70 percent is made of car loans, while the focus of its insurance business is also car related.

The company has so far acquired 89.6 percent of Turners shares from investors, just shy of the 90 percent threshold which triggers a mop up. Dorchester will issue $14.2 million worth of shares to Turners shareholders who have accepted its offer, while $7.7 million worth of shares will be issued to current and new Dorchester shareholders.

Dorchester already held 19.85 percent of Turners when it entered into a lock up agreement with the target company's chairman, Michael Dossor, who owns 20.8 percent through Bartel Holdings, for a combined 40.65 percent stake. Of all acceptances received so far, including Bartels', the mix had been 40 percent bonds or shares and 20 percent cash.

The Turners board endorsed the $82 million bid by Dorchester, saying the $3 a share offer was within the valuation range of between $2.97 and $3.27 put forward by Grant Samuel in its report. The report said the 9.1 percent premium to Turners' pre-offer trading price was lower than the average incentive offered in successful takeovers of Australian and New Zealand listed firms. But it said no other offer had been made, the finance company already held about 41 percent of the firm's shares, and if the offer isn't successful, the Turners shares will likely trade below the $3 price.

The independent adviser's report said Turners investors who opted for Dorchester shares at 25 cents apiece could receive more or less than the $3 per share offer, while those taking the bonds would receive an attractive interest rate for two years, after which time the notes could be converted to Dorchester shares or redeemed for cash.

In September, Dorchester said that a full takeover of Turners would be funded by $18 million of bank debt, $18 million of bonds, and $30 million from the issue of new shares.

In August, Turners lifted first-half profit 5.9 percent to $2.27 million on a 19 percent increase in revenue to $49.6 million.

The finance company expects to make the first offer settlement on Oct. 30, and after extending the offer to Nov. 7, said it can still accept further acceptances from Turners's shareholders. First NZ Capital managed the company's capital raise, which saw three new institutional shareholders join Dorchester's register.

Shares of Dorchester were unchanged at 26 cents and have gained some 18 percent this year, while Turners stock was unchanged at $3.03 and has gained 30 percent since the beginning of the year.

BusinessDesk.co.nz

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