In a statement to the ASX, the company said it had received “an incomplete, indicative, conditional and non-binding proposal” for the entire share capital, as well as for the Set-up Preference Securities at a price of $0.09 and $21.86 respectively.
The deal would value the company at up to $500m including outstanding debt and other liabilities.
Tom Elliott, analyst at Beulah Capital, said: “I doubt the board will agree to a takeover at the current price.
“It’s hard to say at what price the board would agree a bid. I suspect shareholders would take a lower price than that considered acceptable by the board – but the preference shareholders have the whip hand in any sale, as a condition of their securities is that they get $100 in any ‘change of control’ event.”
Paperlinx said that the proposal to acquire the entire company was contingent on a range of factors such as due diligence and that it was uncertain any such deal would even be put to shareholders.
ProPrint was unable to contact representatives of Paperlinx in Australia, but our UK sister title, PrintWeek, spoke to Paperlinx executive vice president Dave Allen (pictured), who said that a ‘whole of company’ sale would need shareholder approval, but that any sale of part of the company would be decided at board level.
The company added that it had received additional proposals to acquire other parts of the business as part of its strategic review which concludes 30 June and is being advised by swiss merchant bank UBS.
Allen said the statement to the stock exchange was made under the “continued disclosure rules” of the exchange and that the offers are part of UBS’s remit within the strategic review and are at this stage conditional and indicative.
He said: “The approaches are helpful and useful and personally I’m encouraged by it. It shows there is value in Paperlinx.”
However, the statement also said that deteriorating demand in Europe is likely to add a goodwill charge to the expected pre-tax loss and that, while it was in compliance with the covenants associated with its financing arrangements, beyond 31 December 2011 that compliance might be jeopardised by any impairment charge and ongoing trading performance issues.
Elliott considered this a serious possibility. “Given how bad Europe is, there is every chance the company could default on its debt. Any buyer would then probably just negotiate with the receivers.”
However, Allen maintained that “as of today, we are fully in line with those covenants, there is no change at all”.
Paperlinx lost around 80% of its market value in 2011, with shares currently trading at $0.081 on the ASX.
This article originally appeared at printweek.com
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