Pepper Australia has joined forces with the largest shareholder of target RHG (RHG) to stage a takeover bid in an attempt to beat a rival offer from a syndicate led by Resimac Ltd.
After striking a deal with major shareholder Cadence Capital, Pepper is seeking a scheme of arrangement to buy RHG, formerly RAMS Mortgage Corp, increasing its offer to 49.65 cents a share, in cash and Cadence scrip.
RHG will give the Resimac Syndicate three business days to provide a counterproposal, in accordance with the syndicate deed's exclusivity provisions.
In July, the RHG board accepted a sweetened takeover bid from a Resimac-led syndicate of 48 cents per share, an increase of 3.9 cents per share over its original offer (see Tom Elliott's RHG bid may need a top-up).
"As a consequence of this superior proposal, Cadence does not support the current proposal by the Resimac syndicate," Cadence said.
Pepper's offer included 35%s share in cash and one fully-paid Cadence share for every 10 ordinary RHG shares held, based on yesterdya's closing price of $1.465 for Cadence units.
Cadence would also pay RHG investors a fully-franked dividend of 5 cents for each of its shares received under the scheme.
Existing CDM shareholders will receive the full year dividend of 5 cents per share previously announced by CDM.
Under the deal, RHG would paying an extra fully-franked dividend by October 31, which would cut the amount Pepper would pay for the target.
In April 2011 Cadence Asset Management and Wilson Asset Management were part of a shareholder action that prevented the delisting of RHG Limited at 88 cents per share.
Cadence chairman Karl Siegling said group's shareholders had been deliver "an excellent risk-adjusted return" through its investment in RHG.
"This proposal represents an optimal outcome with increased consideration and additional franking for both RHG and CDM shareholders," he said.
RHG updates guidance
RHG expects its full-year earnings will be slightly above the top of the guidance range it provided to the market in February, which was $26 million to $29 million of net operating profit after tax.
The increase is due to a lift in profit because of an adjustment to one of the group's accounting assumptions.
The profit generated due to these changes in accounting assumptions are non-cash items, the group said.