By Phil Boeyen, ShareChat Business News Editor
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Friday 16th November 2001 |
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An appraisal report from Grant Samuel has put the value of the company at between $2.53 and $2.96 per share compared with Danone's offer of $2.35.
"The advice received by the independent directors from our financial advisers Credit Suisse First Boston, and feedback from shareholders and analysts, is consistent with the Grant Samuel view that fair value for Frucor shares is well above the current offer price of $2.35," says a letter to Frucor shareholders.
"The independent directors believe that Danone and other potential purchasers may have significant opportunities for synergistic benefits from an acquisition of Frucor and that these benefits have not adequately been taken into account in the Danone offer."
The independent directors says they have carefully considered the Grant Samuel report and advice from CSFB and conclude that the current offer is below what they consider to be the true worth of Frucor. They will not be accepting the offer in respect of their own shares.
In the appraisal report Grant Samuel concluded that the Danone offer was neither fair nor reasonable.
"In some takeovers there are factors that might suggest that even if an offer is not fair, it is reasonable and that shareholders should consider accepting even though it is not fair.
"In this instance, there do not appear to be any compelling reasons for shareholders to accept a takeover offer that is below the full underlying value. The Share Offer is therefore not considered reasonable."
The report says Frucor would bring a number of benefits to Danone, including established distribution in New Zealand and Australia, strong growth potential in Australia, unique product development skills, excellent marketing expertise and a proven range of cold beverages which could readily be introduced through Danone 's Asian distribution network.
"It is not unusual for the price paid in an acquisition to reflect a proportion of the synergy benefits which may arise following an acquisition. Different purchasers will be able to extract varying levels of benefits from an acquisition of Frucor and accordingly are likely to attribute different values to the company.
"Grant Samuel believes that the benefits that could accrue to Danone from the acquisition of Frucor are potentially very significant. Accordingly in Grant Samuel 's opinion there is no reason why Danone should not be willing to pay the full underlying value for Frucor."
Grant Samuel says the estimated value of Frucor implies a very high level of goodwill, and after deducting for brand values of $33.7 million the company has negative assets of $5.9 million. Nevertheless it points out that "it is not unusual to pay high levels of goodwill for companies with strong brands."
Although Frucor's biggest shareholder, Bain Capital and associates, have already accepted the Danone offer, the conditions of the acceptance allow it to receive any increased price.
The appraisal report also considers it is unlikely that Danone can now reach its 90% conditional target because of the large volume of free-float shares that have been recently traded at between $2.38 -$2.46 per share.
"The purchasers have presumably paid a price above the Share Offer price of $2.35 per share in anticipation of Danone increasing the price or another party making a bid at a higher price," says Grant Samuel.
The independent directors had earlier said they would be seeking competing bids for the company but it appears none has come to light.
This leaves Danone in the position of having to make a higher offer, trying to get enough shares to take it to the 50% level, or abandoning the bid.
A 50% shareholding is favoured by a number of investors who see longer-term value and this view is backed up in the report.
"Grant Samuel does not know what plans Danone has for Frucor if it gains control and can only speculate at its likely course of action. However, Danone could reasonably be expected to utilise the benefits of control of Frucor even if it only holds 50%of the voting securities.
"The result is likely to be positive for Frucor and remaining shareholders given Danone 's well established global presence."
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