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Bapcor offer 'compelling', Hellaby overstating prospects, says biggest shareholder Castle

Friday 25th November 2016

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Bapcor's offer for Hellaby Holdings is "compelling" and in trying to fend off the approach, the diversified investor has overstated its prospects and its independent valuation has omitted some costs, says Hellaby's biggest shareholder, Castle Investments.

Castle, owned by the Hugh Green Trust, holds 27.2 percent of Hellaby and along with Salt Funds Management and Accident Compensation Corp had entered a "pre-bid lock-up agreement" with Bapcor and accepted the offer. 

"We carefully evaluated Bapcor's offer and determined that the price offered was compelling, above our view of fair value of Hellaby shares, and that acceptance would deliver the highest value for Castle Investments," the trust said in a letter to other shareholders that was signed by John Green, Maryanne Green and members of Hugh Green's family, and Chris Darlow and David Randell as trustees.

"Whilst Castle Investments would welcome an increase in the offer price, we would be most disappointed if Bapcor walked away from the offer," they said. "We urge our fellow shareholders, provided you share our view, to join us in accepting this offer as soon as possible."

The statement is a rare sign of unity for the Green family, whose members have been all the way to the Court of Appeal in their fight over deceased former NBR Rich Lister Hugh Green's estate. In October, the appeal court rejected an attempt by Frances and John Green to overturn a High Court ruling last year removing them as trustees of one of the trusts that control the business empire and reinstating their sister Maryanne Green.

Hellaby and Bapcor have been in a war of words over the proposal to acquire the company at $3.30 a share. The stock jumped about 9 percent to that price when the takeover was announced on Sept. 27, the first time in 16 months it had been that high. It rose 0.6 percent to $3.26 today.

Castle also said some of Hellaby's public statements  about its future performance have been "unrealistic and overly optimistic in nature" including comments at the annual meeting that it would reach $1 billion of revenue and $100 million in earnings before interest and tax in five years' time.

"Given Hellaby's track record, we believe these targets are highly aspirational, particularly given the considerable execution risk around purchasing and integrating new businesses in an increasingly competitive and uncertain market," it said.

Hellaby's independent valuation from Grant Samuel was $3.60-to-$4.12 a share, published on Nov. 1, and the company said the offer under-valued the business, especially the automotive unit that Bapcor is interested in. Bapcor countered that the valuation didn't include Hellaby's corporate head office costs but it failed in a request to the Takeovers Panel to look into alleged breaches of the Takeovers Code by Hellaby.

In their letter, the Greens also rejected what they called "the strong implication" in Hellaby's statements that Castle had only accepted the offer "because of matters involving the Green family." John Green and Maryanne Green said they were "united in the belief that the offer represents fair value."

The takeover is a play for Hellaby's auto parts business and Bapcor has said it will sell the target company's equipment, resources and footwear businesses if successful.

Steve Smith, Hellaby's independent chairman, yesterday said the company "rejects Bapcor's views as without merit".

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