I was one of the larger individual investors in Hellaby Holdings when the company received a takeover offer from Bapcor Holdings, an Australian autoparts company. The initial offer was met with a lukewarm response by most investors as well as the board of Hellaby. As an activist investor, I engaged publicly to put pressure on an increase by Bapcor for their buyout offer, which duly happened in January of 2017. Bapcor's second offer was met with support by myself and other shareholders, successfully buying Hellaby Holdings.
This is the post I made on LinkedIn at the time, which was duly picked up by NZ business reporters.
The $3.30 offer by Bapcor (BAP.AX) for the hostile takeover of Hellaby Holdings (HBY.NZ), appears to have completely stalled.
Today, Bapcor has registered another 'disclosure of movement' in stock holdings, essentially re-confirming that the Salt Asset Management stake promised in late September has been sold into the offer. A quick scan of the Bapcor disclosure document shows that they only have 30% of the shareholders sold into the offer. This is one week after they procured a letter of support from Hellaby's largest shareholder, the Hugh Green Group, who were one of initial parties to sell into the offer, who exhorted other shareholders to accept.
That message appears to have fallen on deaf ears, and may well have been counter-productive. Even after this highly irregular communication, not even 1% of the Hellaby shareholder base, outside of the original three shareholders to sign up to the offer, has accepted the Bapcor offer in the week that followed.
This tells us a few things.
I, like most Hellaby shareholders, see a company with much potential over the next few years with the new direction and strategy offered by CEO Alan Clarke and the board.
Hellaby shareholders know their company pay a strong dividend, around 9.5% gross yield even at the current "takeover influenced" market price. NZ investors will struggle to find another investment out there that offers such a good yield and good value.
Crucially for Bapcor, it also means that many New Zealand investors aren't going to roll over and meekly accept a rather mediocre offer by predatory Australian companies looking for value.
If Bapcor are serious about buying Hellaby, they will have to improve their offer.
I suspect Bapcor know they will need to do this, and after being rejected by the NZ Takeovers Panel with a complaint about Hellaby's target statement, have made more conciliatory noises in a recent article in the Australian Financial Review. Bapcor have attempted to correct statements that say they will not improve on their offer, confirming that they wish to keep their options open on improving price. In the National Business Review on 23 November, they stated of an increased offer:
“that's potentially the situation,” and also issued a press release on 21 November, to correct a Radio NZ report they wouldn't increase their offer, noting
Bapcor reserves all of its rights to increase its offer price in the future in accordance with the Takeovers Code, should it decide in its absolute discretion to do so.
What is now clear is that Bapcor is wasting its time with a low offer of $3.30 per share. 70% of Hellaby shareholders have worked out that the company is worth more this. Not only that, Hellaby shareholders can expect an approximately 10c per share dividend from Hellaby paid out in early April based on the financial half year that ends on December 31, less than one month away. Why would they give away that money to Bapcor for nothing?
Let's remember Hellaby has great potential and is a company;
If Bapcor aren't prepared to improve on their offer and pay a proper price for Hellaby, then I'm perfectly content to see Hellaby continue to grow through organic growth and acquisitions in the years ahead. That being said, I would welcome a much improved offer from Bapcor, and would give such an offer appropriate consideration.
Disclosure: Bhatnagar interests own just under 1.2% of Hellaby Holdings. This article represents the author's opinion and is not intended to constitute financial advice. Shareholders should seek independent advice from an authorised financial adviser before accepting or declining any takeover offer.