One of the more interesting corporate takeover battles in the Australian building products and construction sector at the moment revolves around paint maker Dulux’s efforts to secure control of building products supplier Alesco.
In the latest development, Dulux has slammed the Alesco board’s reasoning behind a June 12 rejection of Dulux’s offer for the company, saying the reasoning offered for the rejection is inadequate.
“Further to its preliminary observations, released in an ASX announcement on 12 June, DuluxGroup has since undertaken a detailed analysis of Alesco’s target’s statement and considers that the Alesco board’s reasons for rejecting DuluxGroup’s offer are misconceived and deficient,” Dulux said in a statement to the Australian Stock Exchange.
Dulux says an independent valuation contained in Alesco’s target statement in response to the takeover was based on a ‘theoretical scenario where the business units are individually sold and head office is closed’ – an offer not currently available to Alesco shareholders.
That independent statement valued Alesco at between $2.23 and $2.52 per share – well in excess of the $2.00 per share Dulux is offering in the takeover bid.
In a statement earlier this month, the Alesco board recommended the company’s shareholders reject Dulux’s ‘inadequate’ offer for the company.
The board argued that Alesco has a strong platform for future growth and stands to benefit from a recovery in the detached housing and renovation markets.
Because of this, and in light of the independent expert’s report, Alesco says, Dulux’s offer does not reflect fair value for the company’s shares.
Dulux, however, which already owns just under 20 per cent of Alesco and recently extended the deadline for its takeover offer until July 20, says its offer of $2.00 per share for Alesco represents a 43 percent premium to Alesco’s last trading price before the offer was announced and is therefore a compelling offer for Alesco shareholders.
Dulux denies the deal is a ‘must do’ from its own point of view.
Whether or not the takeover bid is successful remains to be seen.
On one hand, investors would accept normally accept 43 percent premium in a takeover situation – especially since Dulux already owns almost twenty per cent of the company and could therefore block any competing takeover bids.
Still, Alesco shareholders will be more than mindful of the fact that by selling now, they would be doing so at the low point of the building cycle.
On the whole, it is unlikely that a takeover or merger would have a major impact on the building materials market.
Dulux, which operates mostly in Australia and New Zealand and whose brands include Dulux, Berger and Selleys, focuses on the manufacturing of paints, protective coatings and home improvement products. Alesco, by contrast, makes construction products – particularly concrete – and equipment, cabinets and window products and garage doors and openers. Any overlap between the companies’ offerings, therefore, should be minimal.
Still, as is often the case with takeovers, the battle has provided a significant amount of drama so far.