Southern Lamb made the offer with 50.35% already in its pocket, having secured acceptances from Blue Sky’s second, third and fourth-largest shareholders, giving it effective control.
Blue Sky Meat’s largest shareholder won’t sell to an undervalued offer from Southern Lamb Investments, which has all but sewn up control of the Invercargill meat company.
Southern Lamb Investments – which was set up to take over the meat company and is associated with Blue Sky Meats chair Scott O’Donnell and director Andrew Lowe – offered $3 per share to take control of the company in early March, more than twice the $1.30 price the shares last traded at on the Unlisted Exchange, but below an independent valuation of the firm.
Southern Lamb made the offer with 50.35% already in its pocket, having secured acceptances from Blue Sky’s second, third and fourth-largest shareholders, giving it effective control.
The only major shareholder not on board is NZ Binxi (Oamaru) Foods, which owns 19.84%. Binxi’s parent is China’s Heilongjiang Binxi Cattle Industry Co.
According to Blue Sky’s target company statement, Binxi’s decision to keep its stake isn’t about price.
“Binxi’s present intention is based on its parent company’s circumstances in China and is unrelated to the terms of the offer,” the document said.
The independent committee said it has “no visibility” into the circumstances of the parent company but considers there is a “reasonable prospect that Binxi will not accept the offer”.
As a result, Southern Lamb Investments will likely acquire between 50.35% and 80.16% of the shares under offer.
With a majority shareholding of less than 75%, Southern Lamb will have effective, but not absolute control of Blue Sky, it said.
If it obtains more than 75%, it will be able to pass special resolutions on its own.
The committee also said it considers Southern Lamb’s offer price of $3 undervalues Blue Sky, despite the hefty premium.
It is below the independent adviser’s assessed value range for the Blue Sky shares of $3.12 to $3.67 per share.
It is also below the independent adviser’s assessed net tangible asset value of $3.15 per Blue Sky share.
The independent adviser, Campbell MacPherson, concluded the offer is “unreasonable”.
On a standalone basis, these valuation factors would tend towards the independent committee recommending that shareholders reject the offer, the committee said.
However, it also noted that the offer is now unconditional and therefore Southern Lamb will become the controlling shareholder of Blue Sky.
As a result, “the key question for shareholders is whether to remain invested in a company controlled by Southern Lamb”, the committee said.
The closing date of the offer is May 6.
