Offer for traffic group may come to standstill May 5, 2011
MACQUARIE Group's $275 million joint offer for traffic camera group Redflex Holdings may be about to come to a screaming halt, otherwise known as ''an inflection point'', thanks to a push for a different deal understood to be headed by the group's ousted chairman, Chris Cooper.
The Cooper camp is believed to be calling for the bidders to drop the link between their offer price and the Australia-US dollar exchange rate, and to lift the cash bid above the nominal $2.70 to which it is currently pegged.
The opposition represents a very real threat to the agreed acquisition of Redflex by Macquarie and its partner Carlyle Group, scheduled to go to a shareholder vote at Melbourne's Novotel on Monday morning, because the numbers are finely balanced.
The bidders already speak for 12 per cent, which cannot be voted at the meeting. That leaves them needing a supporting vote from three quarters of non-associated shareholders. Published statistics have previously shown that barely 60 per cent of all shares get voted in such circumstances, and vastly fewer shareholders by number.
On that basis, the Redflex deal could be toppled by shareholders owning as little as between 15 per cent and 18 per cent of the company.
Last year's Redflex annual report showed Elizabeth Cooper, spouse of Chris, still held more than 11 per cent of Redflex. The two recipients of a controversial placement which was one of the arguments for Cooper's removal as chairman, Ms Cheng Man Oy and the Ho family's Investaco, held 5.6 per cent and 5.4 per cent respectively.
If either of those two groups joined with the Coopers to vote against the scheme, they could sink Macquarie/Carlyle's acquisition strategy.
Those inside the Redflex tent declined to discuss even the existence of a renegade movement, but Insider hears that Macquarie workers were beavering away last night on how to respond to the specific demands.
Clearly there is still daylight between the price being offered by Macquarie/Carlyle and what the consortium believes it can extract from owning Redflex. The question is how much of that upside they are prepared to give away to nail the deal - and whether they need the deal that badly at all.
Insider has pointed out previously that the $2.70 cash bid is, at face value, significantly lower than a mooted $3.50 a share offer in late 2008 that never evolved into a public takeover.
Redflex has countered that because its business is heavily dependent on expansion and income in the US, its value is inextricably linked to that currency.
That is why the existing bid sits at $2.70 only while the Australian dollar is worth between US98 cents and US$1.02. The sliding scale calculation in the scheme booklet sent to shareholders in early April cut out at an exchange rate of $US1.06.
At yesterday's exchange rate of $US1.085 to the Kanga, the cash-in-hand value of the bid would fall to about $2.54 a share - something the market has reflected in dropping the price from between $2.55 and $2.60 to a close yesterday of $2.49.
The risk of pressing the bidders is that if they decide that it is all too hard, and allow their offer to be voted down, Redflex shares will revert to price levels of this time last year before Macquarie showed its hand - which were around $1.80 a share, and made possibly worse by the Macquarie/Carlyle 12 per cent stake overhanging the market. _______________
Bythe way, I rang the company to ask about the "Reason for trading halt" page, and Marilyn, the RDF Company Secretary, on me asking, "So, whats the scoop, Marilyn?" said, "There is no scoop". Sorry, Marilyn- I don't believe you. :P She said the letter will be out this arvo.
RDF Price at posting:
$2.49 Sentiment: None Disclosure: Held
