The Pacifica board will be spending this morning wiping the considerable amount of egg off their collective faces, after succumbing and recommending Bosch’s improved takeover offer of $2.20 per share. The new offer is a 15% improvement on Bosch’s previous offer of $1.92 and “represents a 40% premium to the volume weighted average price of Pacifica shares” since 29 August 2006.

In its announcement, the Pacifica Board admitted that it had earlier rejected an offer, also from Bosch, for $2.40 per share on 28 July 2006. Since rejecting Bosch’s original offer, Pacifica announced yet another profit downgrade (from the “mid-$30 million range” to the “low to mid $20 million range”).

In addition to recommending the $2.20 offer, Pacifica has also agreed not to “solicit or encourage any competing transaction or participate in negotiations or discussions relating to a competing transaction” – a no shop clause. Pacifica shares opened just below the offer price (at $2.17), with the market expecting that no higher bid to be forthcoming.

Pacifica’s rejection of Bosch’s original offer has ended up costing shareholders around $27 million – equivalent to next year’s entire forecast profit. While it is always easy to make decisions in hindsight, perhaps the board could have used a bit of foresight given Pacifica’s horrendous performance in recent years (the company has delivered an annual return to shareholder of negative 3.4% over the past decade).

For the record, Pacifica’s chairman is none other than Jerry Ellis, who you might recall was BHP minerals boss (and later its chairman) during the infamous Magma Copper and HBI fiascos (which cost BHP shareholders $6 billion), so he is no stranger to losing shareholders’ funds.

Peter Fray

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