By NZPA
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Wednesday 8th January 2003 |
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The analysts, who asked not to be identified, said "some form of bid was inevitable", given High Court directions in November after it ruled PPCS had breached the Securities Amendment Act when it increased its stake in Richmond to 52 percent.
The court's ruling meant PPCS could forfeit 6.7 million shares and lose 9 percent of its Richmond stake, which would reduce its holding to 43 percent, or it could sell all its shares, or launch a takeover bid before January 24.
PPCS chief operations officer Keith Cooper said today the bid, put together during the past 10 days, was 35 percent above the past three months' average share price to December 20, so as to "make it more acceptable" to shareholders.
"We believe they have been given a fair price to consider," he said.
Richmond shares closed up 50c today at a 2-1/2 year high of $2.90.
Richmond chairman Sam Robinson would not comment on the offer until an independent review was completed in about two weeks and Richmond's board made a recommendation on the offer.
"The process is controlled by the Takeovers Code until then," he said
Mr Cooper said if the $60 million bid was successful, PPCS' equity ratio would fall only slightly to the 45 percent range.
Under the Takeovers Code, an independent report must be filed on the offer within 14 days. Richmond's directors will then make recommendations to their shareholders.
Mr Cooper hoped the level of the offer would be "reflected well" in the independent report.
One analyst was asked if PPCS were taking a "dollar each-way" by launching the takeover bid, following the announcement it will appeal the High Court decision.
He said if the bid was successful, the appeal would not need to go ahead, while Mr Cooper would only say that the appeal, due to be heard in mid-April, was "still in place".
One analyst described the 35 percent premium offer as a "rarity" in terms of recent takeover bids and was designed to entice the shareholders to accept the bid.
"Obviously there has been ill-feeling between the two companies and shareholders, but they (PPCS) want to take a long-term view," he said.
The analysts said if the bid was successful, the biggest issue to be faced by PPCS would be procurement of stock, already in short supply.
"It is a significant development in the meat industry. PPCS was a regional player until now," he said.
Stock procurement in the upper South Island has been hit hard by the alternative use of land and recent climatic events.
However, Mr Cooper was confident about procurement levels in both the South Island and North Island regions, ruling out stock movements between the islands.
"We have a long track record dealing with South Island farmers and will remain competitive on delivery," he said.
Once the independent review is completed and recommendations formally made to shareholders, a minimum 90 percent must accept for the bid to be successful.
Neither analyst would speculate on a likely outcome, other than to say the offer was "attractive" and a "good price" for shareholders to consider.
In spite of Richmond posting a loss of several million, and profit of about $15 million the year before, its turnover of more than $1 billion would be attractive to PPCS, one analyst said.
"They will have to work in some synergies to increase profitability," he said.
Mr Cooper said PPCS would still prefer to settle the matter out of court, to achieve a speedy resolution to what had been a long and costly legal exercise.
The company said restructuring was likely if the bid was successful, with some jobs "streamlined and some other others expanded", Mr Cooper said.
PPCS currently has about 3500 staff working in 13 South Island meatworks, while Richmond has up to 5500 people working for it at peak periods.
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