Patties Foods accepts 232M Dollar Pacific Equity Partners Takeover Offer

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Patties Foods chairman Mark Smith has expressed confidence the knife will not be taken to the food manufacturer’s Bairnsdale facilities in Victoria’s east after agreeing to a takeover from private equity.
 
The proposal, which values the ASX-listed Patties at $232 million, came from local private equity giant Pacific Equity Partners, with the board of the Four’N Twenty pie maker publicly backing the deal yesterday.
 
“PEP acknowledges the importance of our Bairnsdale operations and the impact on the Bairnsdale community,” Mr Smith.
 
The suitor’s positive view of the relationship with the Bairnsdale community played an “important role in entertaining the bid”, he added.
 
“We have the view they’re a reputable potential owner with a good track record (in the field).”
 
PEP has wide-ranging experience in consumer foods in Australia and New Zealand, having at some stage owned Peters Ice Cream, Manuka Health, V energy drinks, Pinnacle Bakery, Tegel and Griffin’s Foods.
 
It is looking to add Four’N Twenty, Nanna’s and Herbert Adams to that list through the purchase of Patties.
 
The Patties board came to its decision on Wednesday night after recently receiving a formal offer, but the deal had been bubbling through the year.
 
“They approached us a while back,” Mr Smith said. “We went through a period of intensive negotiations … and ultimately decided the bid represents attractive value to shareholders.”
 
Mr Smith added Patties at no stage went looking for a buyer despite talk of interest from private equity. “The business was not for sale,” he said. “We received an unsolicited bid from PEP.”
 
Patties shares yesterday closed up 7 per cent at $1.69, above the $1.65 a share offer price — although this does not factor in a special dividend of up to 25 cents a share for eligible shareholders.
 
The share price performance suggests investors may be hoping for a rival offer, although the Patties chairman confirmed the PEP bid was the only one received despite previous market talk of predators lurking.
 
A shareholder vote on the scheme is slated for late August, with Patties hoping a deal will be wrapped up in September.
 
“We don’t anticipate any regulatory issues,” Mr Smith said, confirming PEP would need Foreign Investment Review Board consent.
 
The proposal is expected to clear the shareholder approval threshold given confirmation the founding Rijs family will use its 36.6 per cent holding to vote in favour.
 
The Rijs family, which set up the business in Lakes Entrance in 1966, played a key role in the acceptance of the bid given the position of both Richard and Harry Rijs as directors on the board.
 
“We discussed it with the two family directors on the board,” Mr Smith said. “The full board was part of the process and it has received unanimous support.”
 
It is less clear whether the firm’s second largest shareholder, Myer Family Investment Co, will follow suit with its near 10 per cent holding.
 
Mr Smith said he was unable to comment on the position of the Myer family trust, which has backed Patties since its IPO at $1.75 a share in 2006.
 
He said the 31 per cent premium was too good to turn down despite confidence in its growth trajectory. The prospect of cash rather than a scrip deal also tilted the balance.
 

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