A consortium comprising private equity firm The Carlyle Group and National Hire offered to buy the business for A$6.29 per share, excluding dividends. Including the A$0.11 dividend that Coates has declared, the offer is worth A$6.40 per share. The offer values Coates at A$1.58 billion.
Coates was quick to respond to the offer, describing it as ôhighly conditionalö and dismissing it on grounds that it ôcontinues to undervalue the Coates operations and continues to discount the benefit of substantial synergiesö.
Coates also said that the bid, which is believed to be the consortium's second bid, corroborated that its ôdecision to reject earlier offers was correctö.
Coates is AustraliaÆs largest equipment hire company with over 120 years of experience supplying to sectors like engineering, building construction and maintenance, mining, and manufacturing. It has over 200 branches and overseas operations in the UK and Indonesia.
National Hire is a younger company started in 1988 which operates in Australia and Indonesia. In 2004, it undertook a significant merger and is now a leading hire company in Australia and a major player in towers, power generation and engines.
On May 1, Coates told shareholders that it had appointed Macquarie Bank to ôundertake a review of strategic options with a view to maximising value for all shareholdersö. The review was prompted by private equity approaches that Coates had received.
Then, on August 29, Coates said that none of the proposals it had received met the price expectation of the CoatesÆ board and further that they did not reflect any synergy benefits. This was announced alongside results for the year ended June 30, 2007, which showed a profit increase by 9.4% year-on-year to A$102.4 million. This was below guidance of A$106 million.
Coates did not disclose financial details of the bids in its blanket rejection and nor did it reveal the identity of the bidders. Media speculated at the time that National Hire and Carlyle bid jointly and that French hire group, Loxam also submitted a bid. It now seems likely that National Hire and Carlyle did bid and have now upped their offer.
Some specialists have suggested that private equity firms could be bidding conservatively, despite the attractiveness of the asset, because the credit crunch has made financing more expensive and difficult.
Shareholders reacted negatively to the results announcement last week and Coates' shares dropped 7% on August 29 to close at A$5.15. Yesterday, however, the stock climbed again as investors anticipated a fresh round of bidding from potential buyers. Coates closed up 5% to A$5.82.
Macquarie and Carlyle had no comment.