The increasingly hostile takeover bid between paints maker Dulux Group and garage door, construction products and window maker Alesco has reached a new level.
On Monday, Dulux increased its offer for Alesco from the previous amount of $2.00 per share offered in May to up to $2.23 per share. The new amount is made up of $2.05 in cash plus a payment of up to 18 cents per share in franking credits attached to dividends declared by Alesco.
Dulux, which has repeatedly stated that the deal is not a ‘must do’ from its point of view, now says that, subject to the emergence of a competing proposal, the revised offer represents the best and final offer it is prepared to make.
Alesco, for its part, maintains that even this revised offer is still inadequate.
Interestingly, the latest developments have served to further underscore the extent of the hostility between the two companies.
Conflict between the companies broke out last month following the Alesco board’s rejection of Dulux’s original offer. At the time, Alesco’s board, which produced an independent expert’s report valuing the company at between $2.23 and $2.52 per share, advised shareholders to reject Dulux’s ‘inadequate’ offer for the company.
Dulux shot back, saying the independent expert’s report was based on a ‘theoretical scenario where the business units are individually sold and head office is closed’ and referring to the reasons behind Alesco’s rejection of the offer as ‘misconceived and deficient’.
As the latest developments have unfolded, the mud-slinging match has continued. Dulux managing director Patrick Houlihan says his firm has sought to be cooperative but the Alesco board has chosen not to play ball.
“In seeking to bring this transaction to a conclusion, we have aimed to take a pragmatic approach with Alesco to make our revised offer available to their shareholders,” Houlihan says. “Alesco has chosen not to work with us, and continues to reference a flawed independent expert’s valuation that doesn’t value the company in the way the Alesco board plans to run it.”
Houlihan adds that Dulux feels the new offer “represents an exceptional outcome for Alesco’s shareholders. It is now time for Alesco’s shareholders to make their own decision to either accept our final offer or face the prospect of our offer lapsing.”
Alesco, for its part, has urged shareholders to reject Dulux’s renewed offer, continuing to refer to it as ‘inadequate’ and saying it rejects a number of comments within Dulux’s latest announcement.
Principally, it says, it does not believe it is prudent to pay a dividend of 42 cents per share as suggested by Dulux (the 18 cents per share payment of franking credits Dulux refers to in its revised offer depends on a dividend payment of 42 cents by Alesco).
With the revised offer, it is now more likely that Dulux will indeed get its target – though of course this is far from certain.
Even before the upward revision, the company’s offer represented a 43 per cent premium to Alesco’s last trading price before the offer was announced, and with Dulux already owning just under 20 per cent of the company, it would be difficult to see any rival offer succeeding.
To be sure, the revised offer is at the lower end of the Alesco board’s valuation range and, at any rate, Alesco shareholders will likely be reluctant to sell their company at the low point of the housing construction cycle.
Still, many shareholders may now feel that Dulux’s revised offer is about the best outcome they might get.