Just as Accord is attempting to ‘hug’ Mantra with a fat ‘non-binding, indicative offer, so an attempt to try and inveigle Select Harvests the same way has failed for a Middle Eastern investor.
Select Harvest yesterday rejected a $430.6 million takeover proposal by from one of Abu Dhabi’s sovereign wealth fund. The ASX-listed firm said on Monday it was the target of a $5.85 cash a share offer by Mubadala Investment Company on September 25. The shares leapt 25.4% to $5.27 yesterday after the statement was issued.
There had been considerable speculation late last week that the company would reject the offer and go for a capital raising. The jump yesterday produced a fat short term profit for big shareholders who took up the institutional placement.
The Select Harvest board told shareholders the proposed offer “significantly undervalued” the company, but acknowledged that a revised offer was possible hence the sharp rise in price.
Select Harvest said it would not open its books to Mubadala, citing regulatory concerns, disruption, costs and an unreasonable request for exclusivity. The company said it would not engage with Mubadala or provide due diligence to its accounts after seeking legal and financial advice.
“A number of quantitative and qualitative factors were considered by Select Harvests and its advisers in their assessment of the indicative proposal, which led Select Harvests’ board to conclude that the proposal significantly undervalued the company,” it said it a statement to the ASX.
Select Harvests launched a handy defensive move – a capital raising to bolster its balance sheet, which could ward off further potential takeover offers.
The $65 million raising – comprising a $45 million institutional placement (completed yesterday at $4.210 each) and $20 million retail share purchase plan – will be used to reduce debt.
Select Harvest had total debt of $145.8 million after the $26.4 million purchase of Jubilee Orchards, orchard development costs and other project expenditure.
Net debt was $104.4 million as at June 30, 2017, up from $25.5 million a year earlier. Net debt, including finance leases, climbed to $145.8 million, taking gearing to 52.5%, hence the need for the issue.
The shares have been around 18-month lows after plunging 40% this year.
Small shareholders will be offered up to $15,000 of new shares at the lesser of $4.20 or a 2% discount to the five-day weighted average price up to the closing date of the offer, which has yet to be determined. The share purchase plan will not include brokerage or transaction costs.
Select Harvests said it reserved the right to scale back applications from shareholders if the demand exceeded its target to raise $20 million but could take more than $20 million if oversubscribed.
