Directors of Wellington Merchants, formerly Kirks, recommend latest Brierley offer

The directors of Wellington Merchants, formerly known as Kirkcaldie & Stains [NZX: KRK], have recommended its shareholders accept Ron Brierley's latest takeover offer, with the two largest shareholders indicating they will do so.

Brierley's Mercantile NZ has offered $3.45 per share, an uplift from his previous offers of $2.75 and $3 made in March and June respectively. Kirkcaldies changed its name to Wellington Merchants in July.

The company's high and low scenarios for the shares anticipate a distribution to shareholders of between $3.62 and $3.53 per share, meaning Brierley's offer represents a 2.3 percent discount to the low scenario and a 4.9 percent discount to the high scenario.

"While the company is reasonably confident of reaching the high scenario, as the company is believed to have only one outstanding contingent liability to be discharged, there will be some delay in moving to a winding up and making a distribution to shareholders and we cannot be certain that some unexpected claim will not arise during the course of a liquidation which has a negative impact on the quantum and timing of distributions," the directors said in a statement to the NZX.

The directors said that on balance, and in the absence of a competing offer, it was an attractive offer, dependent on the circumstances of a particular shareholder. An independent adviser valued a high scenario at $3.44 and a low scenario at $3.39, below Brierley's latest offer.

As at Aug. 31, Mercantile's holding company owned 6 percent of Wellington Merchants, making it the third-largest shareholder. At the end of September, Mercantile told Wellington Merchants it had received acceptances for nearly 1.4 percent of the shares it sought, and the directors said the two largest shareholders, who collectively own 39.09 percent of the shares, have told them that they are likely to accept the offer.

"If this were to occur, then with the acceptances already received Mercantile would obtain a majority shareholding in the company," the directors said. "This would give Mercantile effective control over the company's operations, other than in the case of transactions where Mercantile is excluded from voting under the NZX Listing Rules (such as transactions with related parties). This perceived likelihood of Mercantile acquiring effective control is a factor which shareholders should consider."

Mercantile yesterday attempted to oust the chairman and two directors of Smiths City Group, having built up a 17.4 percent stake in the Christchurch-based retailer alongside Sandon Capital since they emerged as a substantial shareholder last year.

The former Kirkaldies shares, still listed on the NZX, last traded at $3.44, and have gained 121 percent this year.

(BusinessDesk)

Click the hamburger symbol top right of our homepage to access the Rich List 2016 and other sections.