Rinker shareholders, led by funds manager, Perpetual Trustees, are going to be the big winners from the capitulation of the company’s board to a higher offer from Mexican cement giant, Cemex.
That’s if shareholders accept the new offer and so far there’s been no sign of a decision from the likes of Perpetual.
Shareholders will receive a higher Australian dollar price of around $19.41, which values the company around the $A17.6 billion dollar mark.
That will gross Perpetual more than $A1.8 billion, a huge return for the investors in its funds holding RIN shares.
Perpetual shares jumped $1.55 yesterday to finish at $81.70 on just 114,100 shares.
And the Federal Government will get a substantial piece of the valuation in the form of higher capital gains tax receipts.
With billions to invest (not all the money will stay here, some will go to shareholders resident in the US) the record market will get a further kick along.
Cemex yesterday won a recommendation for its new, higher offer from the Rinker board after lifting the value of the offer 22 per cent to $US14.25 billion.
Cemex said it would now offer $US15.85 per share, from $US13 previously. Rinker shares had closed at $US15.14 (or $A18.48) on the Thursday before Easter. They rose to $A18.81, up 33c yesterday.
Chairman John Morschel said in a statement and at a Sydney news conference that the “directors concluded that, in absence of a superior proposal, the higher Cemex cash offer represents the best risk-adjusted return for shareholders”.
Cemex made its original bid late last October but it went nowhere after the board and major shareholders, led by Perpetual with its 10.32 per cent stake, rejected the price as being too low.
Cemex extended its offer for a fourth time and it will now close on May 18.
Including debt, the total enterprise value of the transaction is about $US15.3 billion, or $A18.7 billion.
(That will make it the biggest takeover in Australian history by value until the Coles offer from Wesfarmers is sorted out.)
Rinker directors said the new offer was equivalent to $A19.41 per share or $A3.65 above the initial offer and was within a previous independent expert valuation range of $US15.85 to $US17.74.
“The increase is 23 per cent — or US$2.98 – assuming CEMEX had exercised its right to reduce the original offer price, by the 16 Australian cents or 13 US cents per share interim dividend that we paid to shareholders on December 11 last year. Under the terms of the original bid, CEMEX has the right to deduct dividends paid during the offer period from the offer price.
“However, CEMEX has agreed not to reduce their US$15.85 offer by the interim dividend amount.
“In Australian dollars, this higher offer is equivalent to A$19.41 per Rinker ordinary share – using Thursday’s Reserve Bank Mid-point Rate as the A$-US$ exchange rate.
“This is A$3.65 above the initial offer price, which is A$15.76 if we assume CEMEX were to deduct the interim dividend from the offer price.
“Although the offer is still denominated in US dollars, CEMEX has agreed, subject to obtaining any necessary ASIC modifications or Takeovers Panel approval, to give all shareholders (for shares purchased prior to today) the option of a fixed Australian dollar offer price of A$19.50 for their first 2,000 ordinary shares.
“The higher offer is within the US$15.85 – US$17.74 valuation range of the Independent Expert’s Report, which was included in the Target’s Statement distributed to shareholders in November 2006.The Independent Expert, Grant Samuel & Associates, has also verbally advised Rinker that the higher offer from CEMEX is within their current US$ valuation range.”
CEMEX has also agreed to waive all conditions to the bid, except the 90 per cent minimum acceptance condition. If they reach the 90 per cent level, they can then proceed to compulsorily acquire the remaining shareholdings and move to 100 per cent ownership.
However RIN said that if the required level of acceptances is not reached the offer will lapse unless this condition is waived.
“All Rinker directors intend to accept the higher offer for our own Rinker shares, again assuming no superior proposal arises.
“But we have been working extremely hard to find an alternative to this bid.
“Directors and senior management have together reviewed various options, as we sought to maximise the value for our shareholders.
“Our benchmark was to find an alternative that would exceed the value of CEMEX’s offer. In doing that of course, directors had to take into account the various regulatory, timing and other execution risks.
“In particular, we knew that many shareholders would prefer us to find an alternative that incorporated some substantive growth – particularly in the US, which has been our primary growth focus for many years.
“Unfortunately, we were not able to find a substantive growth option that would allow us to build further on that performance.
“We looked at transactions involving other industry participants, private equity and corporate restructuring – with or without partners and with or without the demerger of the Readymix operations here in Australia – and including a re-domicile of Rinker to the US.
“But we could not find an alternative that offered a better risk-reward combination for our shareholders than what the higher CEMEX bid offers.”
The board said that despite the slowdown in US residential construction, “we again confirm Rinker’s profit guidance for our financial year ended March 2007.
“Earnings per share are expected to be around the bottom of the 84 to 90 US cents range, excluding the tax consolidation gain and takeover defence costs”.
