Onus back on Resimac as Pepper spices up offer for RHG
Pepper, which is competing with non-bank lender Resimac to buy RHG, raised the cash component of its bid by 1¢ a share on Monday, upping what it is prepared to pay for the target company by about $3 million.
The latest offer is comprised of 36¢ a share in cash and one share in listed fund manager Cadence Capital for every 10 RHG shares. Using Cadence's closing price before the new bid was announced, the proposal is worth 50.8¢, 1.3¢ higher than Resimac's bid of 49.5¢ a share. However, the bid's value changes in line with the Cadence share price.
RHG directors, who had previously decided Resimac's offer was superior, said they were assessing the latest tilt at the company and urged shareholders to be cautious.
RHG is required to give Resmiac three days to provide a counter proposal. RHG closed up 1¢ at 49¢.
The target's board rebuffed a previous offer from Pepper, because it said there could be insufficient liquidity in Cadence. Pepper has responded by saying the Cadence board has agreed to a share buyback if the company's stock price falls "materially" below its net tangible assets.
RHG's main asset is the lending book of RAMS, which was a competitor to the big banks before the global financial crisis. In 2007, the RAMS branch network and brand was sold to Westpac for $140 million. RHG made a profit of $30.3 million last financial year.
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Pepper's refreshed bid offers 36¢ a share in cash plus one share in listed fund manager Cadence Capital for every 10 RHG shares. Pepper also raised the cash component by 1¢ a share, increasing what it is prepared to pay by about $3 million.
Using Cadence's closing price before Pepper's new bid, the Pepper proposal is worth about 50.8¢ a share, which is 1.3¢ higher than Resimac's bid of 49.5¢ a share. However, Pepper's bid value will change in line with Cadence's share price.
Cadence Capital shares are part of Pepper's consideration — one Cadence share is offered for every 10 RHG shares — so the overall value of Pepper's offer moves with Cadence's stock price. Pepper has also said the Cadence board agreed to a share buyback if Cadence's price falls materially below its net tangible assets, aiming to address liquidity concerns.
RHG directors had earlier decided Resimac's offer was superior and rebuffed a previous Pepper proposal because they were concerned there could be insufficient liquidity in Cadence shares that formed part of Pepper's deal.
RHG is required to give Resimac three days to provide a counterproposal after Pepper's new bid. RHG's directors said they are assessing the latest tilt and have urged shareholders to be cautious.
RHG's main asset is the lending book of RAMS. The article notes RAMS' branch network and brand were sold to Westpac in 2007 for $140 million, and RHG reported a profit of $30.3 million in the last financial year.
After the new Pepper bid was announced, RHG shares closed up 1¢ at 49¢. Share price movements may reflect market reaction to the competing offers and the variable value of Pepper's Cadence-based consideration.
RHG's board had worried that Cadence shares in Pepper's offer might lack sufficient liquidity. In response, Pepper said the Cadence board has agreed to a share buyback if Cadence's stock price falls materially below its net tangible assets, which is intended to help support liquidity.
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