The offshore cash splash buying up NZX listed companies continues, as dual-listed Pacific Brands has joined Abano Healthcare in receiving a separate, unsolicited offer from an overseas company this week.
Dental and radiology business Abano has been offered more than $30million to sell its 50% stake in audiology company Bay International, its book value being just under $12million, while yesterday United States clothing giant HanesBrands offered $A1.1billion ($NZ1.21billion) for 100% of dual-listed Pacific Brands, a 22% premium on its last trading price.
Low interest rates and healthy balance sheets of large international companies are behind the recent merger and acquisition (M&A) splurge on New Zealand companies.
Recently, coating manufacturer Nuplex was the subject of a more than $1billion scheme of arrangement offer, governance software manufacturer Diligent was taken over for more than $940million and Dunedin niche engineering company Scott Technology accepted $41million in return for a 50.1% controlling stake, taken up by Brazilian food giant JBS.
The offers for Abano's stake in Bay International and Pacific Brands were unsolicited.
Pacific Brands yesterday announced it had entered a "scheme implementation deed'' with HanesBrands for it to acquire 100% of Pacific Brands shares in Bay, for $A1.15 per share in cash, a 22% premium on Pacific's last closing price, which implied a market capitalisation of $A1.1billion.
Pacific Brands' directors unanimously recommended the transaction, subject to a favourable independent report.
Forsyth Barr broker Lyn Howe said the proposal for Abano was from an international hearing device manufacturer and was "within range'' of global audiology M&A transactions.
She said while Bay's book value was $11.9million, Forsyth Barr's assessed valuation for the Bay stake was $28.5million.
"Given Abano has granted due diligence and initiated a divestment process for its stake in the [Bay International] joint venture, this suggests Abano also views the indicative price as reasonable,'' she said.
Craigs Investment Partners broker Peter McIntyre said the unsolicited offer for Abano's Bay stake was an "attractive price'' and if the sale went ahead, Abano's balance sheet would be "significantly strengthened''.
"It would also make Abano a pure dental play business, aside from its small radiology business, improving transparency and arguably making it more attractive to investors,'' he said.
While viewing the potential acquisition positively, Mr McIntyre said he would maintain a "hold' recommendation on Abano stock, pending confirmation of an unconditional offer.
Mrs Howe said the earnings momentum for Bay International was positive and "due diligence will be conducted by the potential acquirer''.
She cautioned earning potential of Bay International was unproven.
Full-year 2016 was expected to be the first year of positive equity earnings for Abano, from the joint venture.
