PearlStreet rejects rival $42m offer

Takeover target PearlStreet has rejected a proposed $42.1 million cash takeover bid by Campbell Brothers, which was conditional on a recommendation from the target's board.

The offer, announced today, was set to rival a $23 million recapitalisation proposal from Sydney-based private equity group Catalyst Investment Managers Pty Ltd.

Brisbane-based Campbell Brothers said in a statement today it planned to offer PearlStreet's investors 56 cents per share plus a final dividend of one cent per share.

Campbell Brothers also said it would assume Perth-based PearlStreet's net debt of $44.6 million, taking the total consideration to $86.7 million.

But PearlStreet promptly rebuffed the offer "as not being in the best interests of shareholders", instead throwing its support behind Catalyst's plan.

Campbell Brothers' bid came three days after PearlStreet said Catalyst would invest $23 million in the company under a recapitalisation proposal, giving it a stake in PearlStreet of at least 46 per cent and up to 63 per cent.

"After carefully considering both Campbell Brothers' proposal and the recapitalisation proposal from Catalyst ... the PearlStreet board has concluded that the Catalyst recapitalisation proposal provides a better outcome for all PearlStreet shareholders," the target said.

It said Catalyst's proposal "will enable PearlStreet to participate in identified growth opportunities within the energy, resources and infrastructure sectors".

Catalyst also "gives PearlStreet access to a strong financial partner and will enable the company to significantly reduce its debt levels".

PearlStreet said its chief executive Anthony Wooles, who holds a 50.7 per cent stake in the company, supported Catalyst's plan and did not intend to accept Campbell Brothers' bid.

This is the second defeating condition to Campbell Brothers' offer, which required a 90 per cent acceptance level.

Campbell Brothers, an industrial testing provider and chemicals producer, wanted to takeover PearlStreet to expand its presence in the non destructive testing (NDT) market.

PearlStreet is Australia's largest provider of NDT services, which involve the use of testing techniques such as x-ray and ultrasonic flaw detection to identify damage to industrial components before failure occurs and without the need to physically break down materials.

Campbell Brothers also announced today it had launched a fully underwritten one-for-six renounceable rights issue to raise about $196.6 million.

The issue price will be $22 per share, a 25.7 per cent discount to its closing price on yesterday of $29.59.

Campbell Brothers also updated its 2009/10 net profit guidance to about $38 million, in line with the previously announced range of $35 million to $40 million.

"Our customers' activity levels are showing clear signs of stabilisation and improvement, which bodes well for volume throughout in our laboratories," Mr Kilmister said.

PearlStreet shares jumped 10.5 cents, or 24.71 per cent, to 53 cents on Thursday, giving it a market value of $39.81 million. Campbell Brothers shares added $1.56, or 5.27 per cent, to $31.15.