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Overplaying the hand

4 June 2021 By Antony Currie

Fortune is supposed to favour the bold. This ancient Roman proverb is doubtless in the minds of Australians involved in what is shaping up to be the busiest year for contested acquisitions Down Under. At some point boldness starts looking more obnoxious than strategic.

There’s a new twist, for example, in the A$355 million ($273 million) battle for citrus and berry farms owner Vitalharvest Freehold Trust. Roc Partners and a unit of Macquarie Bank have lobbed in 17 separate offers between them. Now Roc is pledging to outbid Macquarie any time it ups its price. The fight has taken Vitalharvest’s value to 65% above tangible net asset value. Macquarie already owns almost a fifth of the farmer and has other advantages in land rental contracts, but Roc is still throwing rocks.

Meanwhile, Betmakers Technology boss Todd Buckingham must be ruing his A$4 billion late entry into the fight for Tabcorp’s wagering and media unit a week ago. It was always a long shot, since Betmakers was at the time worth just A$1.3 billion. But Buckingham’s financing plan rested not just on issuing A$3 billion of new stock, but doing so at a 15% premium to its 10-day average. That meant diluting his own shareholders by 70%. They revolted, with the wannabe buyer’s shares now a third lower, taking the implied dilution now needed to almost 80%.

One audacious deal looks likely to be more successful. Mortgage-settlement firm PEXA managed to leverage takeover offers, including one from KKR last week with a three-day time limit, to get a better price by launching a snap initial public offering – a clever manoeuvre by newbie investment bank Barrenjoey. The $3.3 billion enterprise value is over 60% higher than that implied in discussions PEXA’s largest shareholder Link Group had with Carlyle and others a few months back.

Issues remain. The majority of large Australian IPOs this year trade below their offer price. But the PEXA transaction should send a message to a market full of fractious bidders: “Calm down.”


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