Asaleo Rebuffs Bid from Biggest Shareholder

The board of personal hygiene products company Asaleo Care has rejected the $684 million takeover proposal from its largest shareholder, arguing the bid materially undervalues the company.

Asaleo, which owns brands such as Libra and Tork, received the $1.26 a share bid from Swedish hygiene company Essity in December last year. Essity owns just over 36% of Asaleo’s shares.

On Wednesday, Asaleo’s board told the ASX in a trading update that they believed the offer “fundamentally undervalues Asaleo Care and is materially inadequate”.

The statement listed a number of reasons why, including that the $1.26 price undervalues the business on a standalone basis and that a majority of non-Essity shareholders opposed the opposition.

“The Independent Board Committee, after careful review, considers that the proposal fundamentally undervalues Asaleo Care, is materially inadequate and does not reflect the strategic value of the company to Essity,” chairman Harry Boon said.

However, the board said the company “remains open to further engagement”, provided the proposal reflects the strategic and financial benefits the acquisition would offer to Essity.

Asaleo shares closed at $1.28 on Monday and $1.32 yesterday (up more than 3%) as the logic of the rejection became clearer – it’s all about a higher price (Like the bid for Coca Cola Amatil).

Supporting the board’s stance was a brief update on the company’s full year (December 31) results.

Asaleo said it saw a 2.3% rise in revenue to $419 million, and earnings growth of 6.3% to $89.2 million.

Underlying earnings before interest tax depreciation and amortisation of $87.2m was “ahead of previous guidance of upper end of $84-87m. Underlying EBITDA $89.2m from continuing businesses (excluding Baby NZ loss), up 6.3%.

“ (There was a) further reduction in net debt to $94.9m from $139.3m FY19 and $260.1m FY18, reflecting strong cashflow generation and disciplined application of sales proceeds from Australian Consumer Tissue transaction.”

The board said the company now had a “strong balance sheet with sufficient capacity to fund ongoing dividends and flexibility to accommodate accretive bolt-on acquisitions.”

For this year and next directors said the company was “targeting continued revenue growth from FY21 and margin expansion from FY22.”

“FY21 targeting 5-7% revenue growth and EBITDA of $90m – $93m, FY22 targeting mid-single digit revenue growth and EBITDA growth of 10% plus, directors said.


Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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