Takeover target Alesco Corporation may endorse a bid from paintmaker DuluxGroup if DuluxGroup supports a change in the dividend component of the offer.
DuluxGroup and Alesco have been in talks over DuluxGroup’s takeover bid, which includes a cash component of $2.05 per Alesco share.
The talks revolve around a potential increase in the size of dividends payable by Alesco.
On Wednesday, the two companies said they had been unable to agree but would continue talks.
The current cash component of the DuluxGroup offer includes 15 cents in dividends so far declared by Alesco for 2012.
Alesco shareholders may also benefit from the six cents per share in franking credits attached to the 15 cents in dividends.
Alesco said it and DuluxGroup had been considering the potential for Alesco to pay fully franked dividends of 75 cents per share.
That would comprise the 15 cents in dividends already announced and an additional franked dividend of 60 cents per share.
“At its simplest, the board believes that it could support a proposal which delivers shareholders a cash offer of $2.05 per share, which allows shareholders to receive a total of 75 cents per share in fully franked dividends and $1.30 per share from DuluxGroup,” Alesco said.
Franking credits of up to 32 cents per share would be attached to the dividends.
The proposal would be conditional upon DuluxGroup acquiring 90 per cent of Alesco and compulsorily acquiring the remaining 10 per cent.
Alesco said this was because it believed it would not be feasible to pay more dividends other than the 15 cents already announced unless it were certain that Alesco would become a wholly-owned subsidiary of DuluxGroup.
Alesco also said that it was evident that the corporate watchdog, the Australian Securities and Investments Commission (ASIC), believed that the proposal “raised issues” given that DuluxGroup had already stated that its offer was “best and final”.
“In this context, over the past few days Alesco and DuluxGroup have been working together to develop a pathway to implement the proposal,” Alesco said.
Alesco said that if agreement could be reached with DuluxGroup, if there were no tax or regulatory impediments, and if there was certainty of a 100 per cent shareholding outcome, the proposal could approach the bottom value of an independent expert’s value range for Alesco shares.
But Alesco said that if DuluxGroup did not support the additional special dividend, it reiterated its advice to reject DuluxGroup’s current offer.
DuluxGroup said its $2.05 cash offer remained open to Alesco shareholders and was still “compelling”.
In late July, DuluxGroup lifted its original bid for Alesco from $2.00 to up to $2.23, valuing Alesco at about $210 million.
The $2.23 comprised $2.05 a share in cash plus up to 18 cents in franking credits, which was dependent upon Alesco paying 42 cents per share in fully franked dividends.
Morningstar analyst Nathan Zaia said that while DuluxGroup and Alesco had reached no agreement, Alesco coming to the table to discuss a potential increase in dividends improved the likelihood of a deal.
Dulux shares were three cents higher at $3.36 at 1511 AEST on Wednesday, and Alesco was 8.5 cents stronger at $2.00.
