03/04/2007 - 09:25

Cape says closed doors caused PCH takeover talks to fail

03/04/2007 - 09:25

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UK-based industrial services company Cape PLC has withdrawn from discussions surrounding a potential takeover bid for Malaga-based scaffolding and form-work supplier PCH Group Ltd, saying it had been unable to have meaningful engagement with the company.

Cape says closed doors caused PCH takeover talks to fail

UK-based industrial services company Cape PLC has withdrawn from discussions surrounding a potential takeover bid for Malaga-based scaffolding and form-work supplier PCH Group Ltd, saying it had been unable to have meaningful engagement with the company.

Cape had stated its belief that the company was worth 90 cents per share in February, which PCH said in an announcement today it felt did not fairly reflect the value of the company.

In an announcement, Cape said it had been unable to have any constructive dialogue with PCH following a period of high level due diligence, but remained willing to engage with the company to determine a recommended offer, as long as it happened in an open and cooperative manner.

PCH returned fire today, saying the company had felt it wise to be circumspect given that the two groups were competitors in certain markets.

According to PCH, the companies had agreed on a two stage due diligence process.

"In the first stage, Cape was to be provided with high level information," the company said today.

"If Cape had proposed a price sufficient to secure the Board's recommendation then additional confidential information would have been provided to Cape or its financial advisers to enable it to make a final binding offer.

"All of the information that was agreed to be provided in stage one of the due diligence process was provided to Cape and its advisers."

When Cape did not improve its bid, PCH refused to provide the company with further information.

 

 

The full text of a Cape announcement, followed by the PCH announcement, is pasted below

On 22 February 2007, Cape announced that it was in discussions with the Board of PCH which may or may not lead to Cape making an offer for all the shares in PCH.

Cape indicated a non-binding view of value at 90 cents per share (representing a 32% premium to the pre-announcement price) but following a period of high level due diligence, Cape has been unable to have any meaningful engagement or constructive dialogue with PCH or its advisers on a price which could lead to a firm, recommended offer.

Cape remains willing to engage with PCH and its advisers if they wish to determine if a recommended offer can be agreed but this needs to happen in an open and cooperative manner, having regard to the respective interests of each company's shareholders.

Should there be material developments Cape will update the market.

Meanwhile, as previously advised on 22 March 2007, Cape is continuing to pursue other potential acquisition opportunities, namely:

  • a mechanical and electrical business which would increase bundling capacity;
  • a business with existing contracts in nuclear decommissioning; and
  • a high-end cleaning business in order to consolidate the Group's investment in the DBI Group.

Although there are no current negotiations in respect of any of the alternative acquisition opportunities identified above and there is thus no certainty that any of these opportunities will be executed, the Directors believe that each of the above acquisition opportunities would, if completed, strengthen the Group's product offering and would have the potential to add significant shareholder
value in the next 12 months.

 

The full text of the PCH announcement is pasted below

PCH Group Ltd notes the announcement by Cape plc that it has withdrawn from discussions with PCH in relation to a potential takeover offer.

On 22 February 2007, PCH advised that it had received an indicative, non-binding and conditional proposal from a trade buyer in relation to a possible cash takeover offer at an indicative price of 90 cents per share. This was subsequently confirmed by Cape in a releThe PCH Board was (and remains) unanimously of the opinion that the 90 cent offer proposed by Cape was not a price that fairly reflects the value of PCH shares. The Board believes that Cape's indicative offer does not fairly reflect the inherent value of
PCH given its international network and reputation, its asset base, the current flow of work and the prospects for significant future growth. ase to the market.

Cape is a direct competitor of PCH in important international markets in which PCH operates.

The PCH Board was (and remains) unanimously of the opinion that the 90 cent offer proposed by Cape was not a price that fairly reflects the value of PCH shares. The Board believes that Cape's indicative offer does not fairly reflect the inherent value of
PCH given its international network and reputation, its asset base, the current flow of work and the prospects for significant future growth.

At the time of the announcement made by PCH on 22 February, Cape was informed by PCH that a 90 cent offer would not be supported by the Board. Notwithstanding that, and in the interests of determining whether Cape was prepared to pay a price
which the Board of PCH would recommend to shareholders, PCH indicated that it was prepared to provide Cape with certain non public information under the protection of a Confidentiality Agreement. That agreement contains a provision, which is typical of these kinds of agreements, that effectively prevents Cape, for a period of 12 months from the date of the agreement, from acquiring shares in PCH without the support of the PCH Board.

In view of the fact that Cape is a direct competitor of PCH, it was agreed that there would be a two stage due diligence process. In the first stage, Cape was to be provided with high level information. If Cape had proposed a price sufficient to secure the Board's recommendation then additional confidential information would have been provided to Cape or its financial advisers to enable it to make a final binding offer.

All of the information that was agreed to be provided in stage one of the due diligence process was provided to Cape and its advisers.

Cape did not improve the terms of its indicative offer and the PCH Board remains unanimously of the opinion that 90 cents per share is not a price which it would recommend to shareholders.

PCH rejects Cape's self serving assertion that PCH has not been open and co-operative.

As stated above, PCH provided all of the information agreed to be made available to Cape in stage one of the due diligence process. As Cape has not improved the terms of its indicative offer, PCH will not provide any further information to Cape unless the PCH Board is confident that Cape is prepared to pay a price which it can recommend to PCH shareholders. The PCH Board has at all times been, and will continue to be, focused on protecting and enhancing the interests of its shareholders.

Mr Jamie Cullen, the managing director of PCH said today: "We remain very excited about PCH's future. Our business has never been in a better position to capitalise on the opportunities that we are seeing across our Australian and international operations. We have the strategic footprint and the people to achieve our objectives and we look forward to unlocking the value that our business offers for the benefit of all of our shareholders."

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