Toll and Patrick try again

Toll Holdings increases its bid for the Australian stevedore to A$5.27 billion with a cash kicker for majority control.
Logistics company, Toll Holdings remains determined to finalize the acquisition of Patrick Corporation that it began eight months ago with a new offer that values Patrick at A$5.27 billion.

The cash and scrip offer equal to A$7.52 per Patrick share also comes with the promise of a further 20 cents in cash if Toll succeeds in acquiring at least 90% of the company, and another 10 cents if Patrick has not exercised its option to acquire FCL Interstate Transport.

TollÆs managing director, Paul Little, made the new offer on Wednesday just days after the Australian Competition and Consumer Commission overturned its original decision to block the acquisition.

TollÆs previous attempts to buy the company have also been frustrated by an uncooperative Patrick board. ôAfter months of value-destructive tactics from Patrick management, the matter is finally in the hands of Patrick shareholders,ö says Little.

The offer of A$7.52 to A$7.82 per Patrick share together with the 32 cents per share dividend paid by Patrick represents a total value of A$7.84 to A$8.14 per share, significantly higher than the A$6.70 first offered back in August last year.

ôThis is now within the Patrick boardÆs own independent expertÆs valuation range and consequently we see no legitimate basis for the board to refuse to recommend this offer,ö says Little.

Analysts who were still crunching the numbers on Wednesday afternoon were not sure that LittleÆs latest attempt to pull off the mega-merger would succeed, particularly since Toll had not indicated that the offer was final.

The first response from Patrick Corporation was to say that the new price was ôless than compellingö. In a statement released to shareholders, the board said the new offer was priced at a significant discount to PatrickÆs current share price of A$8.05.

The board said shareholdersÆ interests would be diluted if they accepted Toll shares in the merger. ôThe risk profile of Toll shares has significantly increased with the acquisition of a series of joint venture businesses in Asia,ö the statement read, referring to TollÆs purchase of a 60% stake in Singaporean logistics firm, SembCorp Logistics.

PatrickÆs board is also concerned that the new offer provides no clarity as to the future ownership of Virgin Blue, the discount airline in which Patrick owns a majority controlling stake.

Under TollÆs original bid Virgin Blue was set to be partially sold-off to entities controlled by Richard Branson. Under the new offer Little says he is ôprepared to review alternatives for Virgin Blue àincluding a proposed air freight allianceö.

Patrick shareholders have until April 13 to accept the revised terms.