Paperlinx has issued an ultimatum to its disaffected hybrid unitholders: Accept the buyout offer before Friday or expect to get much less later.

There remains a chasm between the two sides though, with Gaby Berger, acting convenor of shareholder advocacy group PXUPA Investor Group Supporters (PIGS) saying hybrid shareholders ‘would have to have a screw loose to accept the offer’, while PaperlinX CEO Andrew Price told ProPrint, “I hope they don’t take it! Our aim is to fix the balance sheet and come back with a much lower offer when it has been repaired.”

Price says the company only made the offer because he promised to do so as part of his campaign to get involved with the company last September, and he is not fazed with the likely less than 10 per cent acceptance rate.

“On one hand we would like to simplify the business structure, but on the other hand it would be good to buy the hybrid shares for much less later,” he says.

[Related: Ups & downs of Paperlinx]

The world’s biggest paper merchant raised $285m in 2007 with an issue of hybrid securities at $100 each and is offering to buy them back at a rate of 250 ordinary PPX shares per hybrid unit. The hybrid units are currently worth about $9 on the open market.

At Paperlinx’s current share price of 4c (down from $3.76 when the hybrid shares were issued), this would give investors a mere $10 per unit and just over half the company’s shares, even though they represent 78.6 per cent of its $351.9m total equity.

Price says: “There is no hurry and the timing is up to us – keeping this structure has no real effect on the business.”

“Maybe we will come back in a few years after executing our 2020 vision and the equity will be at $1bn and they will only have 25 per cent – as our business becomes stronger, they will be entitled to less,” he says.

Trust Company, the responsible entity charged with representing the hybrid shareholders, has emphatically criticised the offer, and encouraged unitholders to reject it, saying it is ‘materially inadequate’ and ‘too low and does not give you a fair share in the enlarged pro forma Paperlinx share capital’.

Other reasons it cites include the continuing uncertainty of the company’s financial position and the likelihood of better returns if and when it returns to profitability.

Berger agrees, saying Paperlinx has made a big mistake making a lowball offer the responsible entity has so strongly rejected.

“These are people who are appointed and paid by Paperlinx, and even they think it is grossly unfair,” he says. “You would have to have a screw loose to accept the offer, it would be like swapping good apples for bad oranges.”

“They have spent $1-2m on this offer and they will have at best 10 per cent of the shares by the end of it. That’s money that could have been better spent fixing Europe.”

Berger says the hybrid shares are now mostly owned by professional investors, with the top 20 holders owning more than 50 per cent of the shares, who are not going to settle for much less than an offer close to their total equity share.

He says they are better off waiting until the company – which while still owing $117m only lost half as much money as last year – becomes profitable again, its share price improves and the board makes a better offer.

The offer, which has been available since October, expires on Friday and will not be increased or extended. So far only 4.5 per cent of unitholders have accepted.

“The Paperlinx board believes the offer is attractive, given the relative market value of SPS units and Paperlinx shares,” the company said in its half-year report last week.

Price says he is disappointed with the Trust Company’s criticism of the offer but he has no control over what they recommend.

“We consider what they have to say, but we have different priorities. Only time will tell who is right or wrong,” he says.

He also defends the near 50/50 split of Paperlinx shares that would result from the offer: “When I was growing up and my sister and I were fighting over the last piece of chocolate cake, my mother only ever had one answer: 50/50.”

“At the end of the day this is a sideshow. The real show is fixing Paperlinx,” Price says.

PIGS members are mourning the sudden death of their champion Graham Critchley (65) who passed away after an accidental fall at his home a few weeks ago.

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