The Talleys takeover of Affco New Zealand has come unstuck, with Affco's independent directors not selling their shares and advising other shareholders not to unless they need a dividend payout.
The Nelson-company has offered 37c a share for the 47.17% of shares it does not own, below the 39.2c a share mid-range valuation calculated by independent adviser Campbell MacPherson, and recent trading of the stock on the New Zealand Stock Exchange.
In a letter to shareholders, Affco chairman Sam Lewis said the independent directors had confidence in the direction the company was taking and that earlier investments would pay dividends in the future.
Mr Lewis said the fact Talleys was increasing its shareholding was also a vote of confidence in the direction Affco was taking.
Campbell MacPherson valued Affco's core business at $133 million to $179 million and its investment in Open Country Dairy at $35 million to $48 million.
From this it calculated total fair market equity in the range of $172 million to $225 million which equated to 34c to 44.4c a share with a mid point of 39.2c.
At 37c a share, it would cost Talleys $88.23 million to buy the 47% of the company it did not already own.
But, Campbell MacPherson did not believe Talleys would increase its offer.
It already has agreement to buy the 23.46% share held by Toocooya Nominees and the pre-bid agreement with Toocooya required Talleys to make a full takeover.
The report said it did not believe Talleys was strongly motivated to acquire the remaining shares in Affco, let alone increase the offer price.
The Takeovers Code also prevented Talleys from offering different prices to different shareholders and Campbell MacPherson said Talleys and Toocooya took some months to finalise their agreement and settle on a price.
It said at 37c, the offer fell within its range, it was in cash and had been accepted by Toocooya. With it holding 76%, Talleys could consolidate control and pass special resolutions requiring 75% support.
"The ability of remaining minority shareholders to influence the company going forward is therefore, in our view, likely to be very limited."
Affco was unlikely to pay dividends in the short term due to capital investment, something it has not done since 2006, and the report warned that trading and liquidity of Affco shares was limited.
