Mystery bid pulls PMP shares out of a trough

THE share price of the printing and direct marketing company PMP swung this week from a record low - prompted by a profit downgrade - to a six-month high, after the struggling printing house announced it had received a takeover offer.

By InvestSMART · 28 Apr 2012

By InvestSMART ·
28 Apr 2012

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The chairman, Ian Fraser, told the stock exchange yesterday the board had received "a highly conditional non-binding indicative offer for the purchase of PMP in a range between 68? to 78?".

The offer values the company at up to $252 million, or triple the 25? a share low PMP was trading at this week after announcing a substantial profit downgrade on Tuesday.

The shares finished 37? higher at 62?.

Mr Fraser would not say if it was a trade buyer or private equity, nor give any details of the structure of the offer. Industry figures were split on the likely identity of the bidder.

"The directors are considering the approach and will keep the market informed of developments," Mr Fraser said in the statement.

The printing sector has been struggling with overcapacity and the general advertising slowdown, and PMP warned this week it was facing "a combination of structural issues, economic drivers and deferral of advertising spend into the first quarter of fiscal 2013".

An industry source said the high price range suggested an offshore industry buyer was more likely.

Peter Hall, the chairman of Hunter Hall, one of PMP's largest shareholders, said the sector was ripe for consolidation.

A new owner could use PMP to buy other assets around the country, he said.

Five years ago, the PMP board rejected a share offer of between $1.95 and $2.15 from unidentified private equity firms.

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Frequently Asked Questions about this Article…

What happened to PMP shares this week after the profit downgrade?

PMP’s share price swung sharply — falling to a recent record low after it announced a substantial profit downgrade, then jumping to a six‑month high when the company revealed it had received a takeover offer. The shares finished about 37% higher at around 62¢ a share following the announcement.

What are the details of the takeover offer for PMP and how much is the company being valued at?

PMP’s chairman, Ian Fraser, told the exchange the board had received a highly conditional, non‑binding indicative offer to buy the company in a range between 68¢ and 78¢ a share. That offer range values PMP at up to approximately $252 million.

Is the takeover offer binding and do we know who the bidder is?

No — the approach is described as highly conditional and non‑binding. Mr Fraser would not disclose whether the bidder is a trade buyer or private equity, and industry figures were split on the likely identity of the bidder.

Why is the printing sector, and PMP in particular, under pressure?

The article says the printing sector has been struggling with overcapacity and a general advertising slowdown. PMP warned it is facing a combination of structural issues, broader economic drivers and deferral of advertising spend into the first quarter of fiscal 2013, which contributed to its profit downgrade.

Why do some industry sources think the bidder might be an offshore buyer?

An industry source noted the high price range of the offer (up to $252 million) suggested an offshore industry buyer might be more likely, presumably because that price range would require a bidder with substantial resources or strategic motives.

What could a new owner do with PMP if a takeover succeeds?

Peter Hall, chairman of one of PMP’s largest shareholders (Hunter Hall), said the sector is ripe for consolidation. A new owner could potentially use PMP as a platform to acquire other assets around the country, expanding scale and market reach.

Has PMP faced takeover interest before?

Yes. The article notes that about five years earlier the PMP board rejected a share offer in the range of $1.95 to $2.15 from unidentified private equity firms.

What should shareholders expect next while the board considers the offer?

According to the company statement, the directors are considering the approach and will keep the market informed of developments. Because the offer is non‑binding and conditional, further details or formal proposals may be required before any deal is finalised, so share price volatility and updates from the board are possible.