Fisher and Paykel Appliances shareholders have a tough decision to make over what to do with their shares as the Chinese Haier Group takeover heats up.
They either have to decide take the cash offer from Haier or hold on in the belief that FPA's strategic plan will increase the share price to the levels set out in an independent report, released yesterday.
Haier warns that if its offer does not succeed, or if it does not receive sufficient acceptances to enable it to invoke the compulsory acquisition provisions of the Takeovers Code, a large fall in the share price from current levels is likely.
The shares closed last night at $1.25, up 3.75%. Until this week, the shares had been below the offer price since September 2008 and have traded as low as 33c in the past 12 months.
FPA independent directors recommended shareholders reject Haier's takeover bid at $1.20 a share, saying it did not adequately reflect their view of the value of FPA, based on their confidence in the strategic direction of the company.
"We note that the independent adviser's opinion is that the full underlying value of FPA shares is in the range of $1.28 to $1.57 per share."
Haier indicated that it was unlikely to increase its offer. The offer price was a "significant" 60% premium to FPA's share price at the close of trading on Friday, September 7 - the last trading day before the market was advised of the potential takeover offer.
The offer price was a 91% premium to the volume-weighted average trading price over the three-month period up to and including September 7, the company said.
Haier New Zealand Investment Holding Company chairman Liang Haishan said shareholders would need to decide between the certainty of Haier's offer or taking a risk on the shares reaching the independent adviser's valuation range.
The independent adviser placed substantial weight on FPA's five-year strategic plan in determining its valuation.
" ...We also considered this information when determining our offer," he said.
"There is a high degree of risk regarding the implementation of the five-year strategic plan and achievement of the goals set out in it."
In determining its offer, Haier had applied "our significant, first-hand knowledge of FPA and the highly competitive global white goods sector, together with a consideration of the economic environments in which FPA operates", he said.
Haier owns 20% of FPA and is making the takeover for the shares it does not own. Allan Gray Australia Pty, the largest shareholder after Haier, with 17.46%, has entered into an irrevocable agreement to accept the offer. Mr Liang said that represented a strong endorsement of the value of the offer.
Haier believed the independent adviser's valuation range was overly optimistic and did not adequately take into account risks in the strategic plan.
Mr Liang said Haier and FPA had a co-operative relationship extending back beyond 2009, when Haier fully supported the recapitalisation of FPA.
"Haier is committed to supporting a strong and vibrant New Zealand-based business," he said.
Takeover offer
• FPA independent directors Keith Turner, Philip Lough, Lynley Marshall and Bill Roest recommend shareholders reject Haier Group offer.
• Independent adviser puts FPA value at between $1.28 and $1.57 a shareHaier indicates its $1.20 offer will not be lifted.
• Haier warns of falling share price if takeover not successful
