We haven’t seen a takeover battle like ALH for years, as Peta Luma explains.
“What shall we do with the drunken retailer” is a refrain based on a well known sea shanty. It is also apposite in the ego-driven battle to control Australian Leisure and Hospitality that has seen five offers, with a sixth perhaps on its way this week?
The remaining small shareholders, plus the hedge funds who at one stage wondered if there’s be any action or profit, can’t believe their eyes or bulking bank balances. For once shareholders will win. Further valuations of ALH will have to be inflated heavily to justify winning, regardless who ends up as the victor.
That’s a full dollar a share above the original $2.75 ‘take it or leave it’ offer from Bruandwo, the bidding vehicle for Roger Corbett and Bruce Mathieson, and it is now back to them to decide early this week just how far they will go. To top it will now require the dynamic duo to go completely above the top range in the KPMG valuation of ALH they dismissed and questioned.
That’s an additional $360 million, an expensive price to pay for the egos of Roger, bruce and their advisers who refused to go down the non hostile route or show any patience.
We have to wait until Monday for any counter offer from Roger and Bruce Mathieson in what has become the biggest takeover battle for years in these crazy times.
Is it too late to slip Roger, or his Coles Myer counterpart John Fletcher, into a long boat till they sober up. Roger is out there spinning and massaging the story for all he’s worth. He has to, as this story from the Sydney Morning Herald on Saturday shows. Don’t look here for any insight into what Roger will do.
It’s self-centred, self-interested pleading at its worst. Roger doesn’t explain his failure to understand the rhythms of a takeover battle. The hardline approach to the $2.75 offer, miserably cut to $2.685 per share when Roger and his not very bright advisers at UBS deducted the 6.5c final dividend from the offer, will cost him around $400 million extra.
Put that another way, the extra $400 million (the Coles Myer offer is $360 million above the $2.75 a share valuation), represents an increase of 41.6%. Now, is that sensible business, or retailing?
Just imagine Roger’s attitude to a supplier who came and asked Woolies for a 41.6% increase in the price of their product. Roger and his hard line crew at Woolies would fall about laughing!
But now we all wait to see if Roger will take another swig of courage and go for a killer blow. $4 a share anyone? The Bruandwo two tier conditional offer of $3.40, then $3.50 is due to expire on Monday evening at 7pm. He can extend it or lift his offer price above the Coles-Macquarie offer, or he can end the offer then try to buy more shares in the market to frustrate Coles and Macquarie?
Of course there’s one other group of people who we should be sorry for. As we have said repeatedly in the past, consider the lot of the poor Fosters shareholders and the avarice and outright incompetence of Macquarie Bank.
Macquarie is now willing to pay more than 50% more (with Coles) for a company it couldn’t really sell last year. It had to fiddle the issue price, stiff small institutions with a $2.50 a share price, ordinary shareholders with a $2.40 a share price, while it and a group of ‘matey’ instos got their shares at $2 each. Plus the $100 million in fees Macquarie ripped from the float that they handled so badly. Talk about a bunch of *ankers!
So on Monday it’s a chance for Fosters shareholders to pound the board and to try and defeat the re-election of two directors, including a leader of Melbourne Inc, David Crawford (who is also on the BHP-Billiton, Lend Lease and Westpac boards).
The only (small) saving grace for Foster’s shareholders is the 10% of ALH the company had to buy to stabilise the shares in the wake of Macquarie’s inept float, are now suddenly worth a lot more. Thanks to Roger “Everyday Low Prices” Corbett and his ego the value of the Foster’s stake has escalated from $96 million to $132 million.
Foster’s should use that and other cash resources to make a distribution to shareholders to try and repay the board’s stupidity in handling the company’s assets, although it should be remembered they did double their money building the pub and pokies division throughout the 1990s.
Monday should be an interesting day at Foster’s, Coles Myer, Macquarie and Woolworths. When will cents and sensibility see the day? What shall we do with the ‘drunken’ retailer?