Allnex offer for Nuplex within independent valuation range, including control premium, Grant Samuel says

Monday 13th June 2016

Allnex Belguim SA's $1.05 billion offer for Nuplex Industries falls within the independent valuation range for the resins maker, prompting the target's board to reiterate its unanimous backing for the deal.

Grant Samuel’s assessment values Nuplex's business operations in a range of $1.12 billion to $1.20 billion, or between $5.36 and $5.86 per share. Allnex, which is controlled by Boston private equity firm Advent International, has offered $5.43 a share plus the interim dividend of 12 cents, making a total of $5.55. That's a 44 percent premium to where the shares were trading before the Feb. 15 announcement. Nuplex last traded at $5.36.

The independent valuation report says the acquisition price, via a scheme of arrangement, implies multiples of 8.4 times historical normalised earnings before interest, tax, depreciation and amortisation for 2015 and 7.4 times forecast ebitda for 2016. That would be consistent with multiples implied by other recent comparable transactions and by the share prices of comparable listed companies, Grant Samuel said. A scheme of arrangement requires support of 75 percent of votes cast.

"Nuplex, despite having sales revenue of $1.5 billion, is small in the context of the global chemical industry," Grant Samuel said. "Allnex is approximately 50 percent larger than Nuplex in revenue terms and would afford Allnex some synergies but critically, an access to the Asian market to complement its existing business footprint."

Nuplex's Asian operations include manufacturing plants in China, Malaysia, Vietnam, Indonesia and Thailand, as well as technical laboratories and a research and development centre. Its earnings from the region are forecast to be $30.1 million in the 2016 financial year, a 40 percent gain on the 2012 year. In that time, volumes are forecast to have climbed about 31 percent to 115,442 tonnes.

Last month, Nuplex raised its operating ebitda forecast for the year ending June 30 to a range of $157 million to $161 million, up from its previous guidance of $145 million to $157 million. The Grant Samuel report projects earnings to rise to $168 million in 2017. Its ebitda margin is forecast to widen to 10.9 percent in the current year from 9.1 percent, before narrowing slightly in 2017 to 10.4 percent.

"Nuplex is a dedicated resins company supplying product to the coatings industry," the report said. "The coatings industry is diverse and comprises a large number of local, regional and multinational participants across the globe. The industrial coatings market is undergoing a period of consolidation, as competition remains intense as a consequence of excess capacity in a number of markets where demand has contracted on the back of weak industrial growth."

Shareholders will vote on the scheme of arrangement at a special meeting in Auckland on July 7, by which time the companies expect to have met all regulatory conditions. Allnex has already gained approvals or waivers from regulators in the Australia, China, New Zealand, Russia and the US. New Zealand Overseas Investment Office approval was granted last week.

Directors have backed the deal, pending any superior offer emerging.

If shareholders approve the scheme, it is expected to be sent for final court approval on July 21. The last day of trading for the shares would be July 25.

Nuplex started in Auckland in 1952 as a flooring distributor before branching out into resins and polymers over the next 20 years. As the firm's focus became increasingly international, it shifted its headquarters to Sydney, while maintaining its New Zealand domicile and main listing on the NZX, which it joined in 1967.

BusinessDesk.co.nz

Comments from our readers

No comments yet