Book to close on KAEFER

A chapter in Western Australia’s industrial history is drawing to a close with the sale of KAEFER Technologies, formerly Bains Harding, nearing completion.

The imminent sale marks the end of a long downhill slide for KAEFER, which a decade ago was a prominent mid-cap industrial company in WA.

KAEFER has an abysmal trading performance, achieving profits in just three of the past nine years.

KAEFER’s last few months have been mired in controversy, with shareholder activists Gerald Pauley and Gordon Elkington challenging restructuring plans put forward by the company.

Messrs Pauley and Elkington have even tried to bring the Takeovers Panel into the dispute, with no success.

The fate of the company and its operating subsidiaries is now in the hands of its administrator, Jeff Herbert of accounting firm PPB, who said this week he had received approximately 15 expressions of interest from parties wanting to buy various assets.

“There has been considerable interest,” Mr Herbert said.

“We are now short-listing people to go to the due diligence process.”

Mr Herbert said at the completion of this process he would require firm offers be made.

“The only constraint is timing,” he said. “These things are necessarily compressed by cash-flow pressures.”

The main assets up for sale are KAEFER’s two Australian subsidiaries, the contracting arm Kaefer Integrated Services and the manufacturing arm KAEFER Products.

Mr Herbert is also looking to sell the publicly listed shell company, which has approximately 520 shareholders.

The bidders for the Australian trading subsidiaries are expected to include KAEFER’s major shareholder, German company KAEFER Isoliertechnik GmbH (KG).

Horst Koerner, an executive director of the two trading subsidiaries, said they were not in administration and were continuing to trade with support from KG.

”The business is running quite smoothly,” Mr Koerner said.

“It is business as usual.”

He said the subsidiaries employed about 270 people around Australia, with Western Australian clients including BHP Billiton, Western Power and CSBP.

The decision to place the parent company into administration followed rejection by shareholders of a selective capital reduction.

Under this proposal, all shares not already owned by KG would have been cancelled in return for a payment of six cents per share.

KAEFER’s independent directors (who have since resigned) recommended that shareholders should support the $1.3 million proposal, which equated to privatisation of the company.

Former chairman George Hogg told shareholders the company was facing further losses.

“The company’s forecasts indicate that the losses will continue until at least 2005 and that a further injection of a significant amount of capital will be required during the second half of 2004,” he wrote in a letter to shareholders.

He added that KG was “the only likely source of capital” and it was “unwilling to continue to fund the company unless it is restructured”.

An independent expert’s report by BDO Consultants concluded the proposal was fair and reasonable, but despite this the proposal did not get majority backing.

Messrs Pauley and Elkington, who have been active members of the Western Australian branch of the Australian Shareholders’ Association, led the opposition.

One week after the shareholders’ meeting, the directors said the company was likely to become insolvent and placed it in administration.

Messrs Pauley and Elkington subsequently applied to the Takeovers Panel alleging “unacceptable circumstances”.

They claimed that the proposed capital reduction and the appointment of administrators were designed to give KG control of the company without making a takeover bid.

The Takeovers Panel said it could not identify any circumstances to support this allegation and has chosen to not take any action.

The heightened level of shareholder interest contrasts with the lack of shareholder support in the past.

In May 2001, only 5.6 per cent of shareholders participated in a $4.1 million rights issue.

KG took up the shortfall and, as a result, lifted its holding from 24.6 per cent to 60.1 per cent.

KAEFER’S CORPORATE WATCH

• KAEFER Technologies has been placed in administration.
• PPB is aiming to sell both the shell company and its operating subsidiaries.
• It has received about 15 expressions of interest.
• PPB is looking to complete the sale by later this month.
• KAEFER has been profitable in only three of the past nine years.

PROFITS AND LOSSES

1995: $3.43m loss

1996: $0.97m profit

1997: $3.50m loss

1998: $7.08m loss

1999: $0.56m profit

2000: $1.28m profit

2001: $6.81m loss

2002: $1.65m loss

2003: $4.05m loss