Haier has 'little hope of takeover'

CLAIRE ROGERS
Last updated 05:00 05/10/2012

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Haier could scrape through to become a majority shareholder in Fisher & Paykel Appliances but has little hope of a full takeover at $1.20 a share, analysts believe.

The Chinese whiteware giant could make a better offer to gain full control of the Kiwi company but won't be in a hurry, they say.

Fisher & Paykel's independent directors yesterday recommended shareholders reject Haier's offer, citing a report from independent adviser Grant Samuel that valued Fisher & Paykel Appliances at $1.28 to $1.57 a share.

Haier, which owns 20 per cent of the company, is seeking to control at least half. It has a "lockup agreement" with Australian fund manager Allan Gray to buy its 17.5 per cent share should it succeed in getting over the 50 per cent threshold.

Forsyth Barr research analyst Andrew Harvey-Green said Haier effectively already had 37.5 per cent with the Allan Gray share.

"You can certainly see a scenario where [getting over 50 per cent] happens, even at $1.20. But I'd be surprised if they got to 90 per cent at $1.20."

Strong interest in FPA shares suggested some buyers believed a higher offer was on the horizon. Forsyth Barr had valued FPA at about $1.30.

Craigs Investment Partner adviser Greg Easton said Haier could sweeten its offer but he expected it would sit on its hands for a while to see if it got over 50 per cent.

"It's going to be a waiting game, until they gain some traction or someone else comes out of the woodwork and says, ‘Bugger it, I'll offer $1.50'."

Haier could quite easily sneak over 50 per cent at $1.20 - buying from inattentive or naive shareholders, he said.

The company would need to regularly update the market of acceptances of its offer, and that could have a snowball effect. The share price could fall back below $1 if Haier's bid failed.

FPA's independent directors said Haier's offer did not adequately reflect their view of the value of FPA "based on their confidence in the strategic direction of the company".

FPA was in a "strong financial position" and at a relatively early stage of implementing its rebuilding strategy.

The report by Grant Samuel said its valuation was based on FPA's five-year strategic plan - which included plans to increase manufacturing in low-cost countries, sign new contracts to supply direct drive motors and new fridge compressors, and forecasts a more than 50 increase in revenues and a 40 per cent increase in sales volumes.

Grant Samuel ascribed a "base case valuation" of $1.45 a share.

Haier said Grant Samuel had been "overly optimistic" and urged shareholders to accept the certainty of its cash offer over "the significant risk inherent in Fisher & Paykel Appliances attaining its five-year strategic plan".

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Its own valuation had factored in more risk around achieving the plan, including the likelihood of FPA turning around its United States business and of improved market conditions overseas.

- BusinessDay.co.nz

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