Dorchester hits 50% minimum for Turners takeover, triggering special 15c dividend

Dorchester Pacific [NZX: DPC] now controls 50 percent of Turners Group NZ [NZX: TUA], formerly Turners Auctions, triggering the car auction firm to pay shareholders a special 15 cents per share dividend, an incentive to shareholders to accept the offer.

The Auckland-based finance company now holds 50.24 percent of Turners, Dorchester said in a statement. The takeover offer gives shareholders either $3 a share in cash, two-year notes that pay interest of 9 percent and convert to Dorchester shares, ordinary shares of Dorchester, or any combination. With the added dividend it effectively makes the offer $3.15 per share.

"It is a very positive sign of support to have achieved a controlling interest at this relatively early stage in the takeover offer period," said chief executive and executive director Paul Byrnes. "The other satisfying aspect of acceptance to date is the quite significant take up in shares and bonds as part consideration."

Dorchester already held 19.85 percent of Turners when it entered into a lock up agreement with the target company's chairman, Michael Dossor, who owns 20.8 percent through Bartel Holdings, for a combined 40.65 percent stake. Of all acceptances received so far, including Bartels', the mix had been 40 percent bonds or shares and 20 percent cash.

The Turners board endorsed the $82 million bid by Dorchester last week, saying the $3 a share offer was within the valuation range of between $2.97 and $3.27 put forward by Grant Samuel in its report. The report said the 9.1 percent premium to Turners' pre-offer trading price was lower than the average incentive offered in successful takeovers of Australian and New Zealand listed firms, but no other offer had been made, the finance company already held about 41 percent of the firm's shares, and if the offer isn't successful, the Turners shares will likely trade below the $3 price.

The independent adviser's report said Turners investors who elected to take Dorchester shares at 25 cents apiece could receive more or less than the $3 per share offer, while those who took the bonds would receive an attractive interest rate for two years, after which time the notes could be converted to Dorchester shares or redeemed for cash.

In September, Dorchester said that a full takeover of Turners would be funded by $18 million of bank debt, $18 million of bonds, and $30 million from the issue of new shares. If it only acquired an additional 50 percent of the company, taking its stake to 70 percent, about a third of the purchase would be funded via bonds and the rest via a share issue with no new bank debt.

In August, Turners lifted first-half profit 5.9 percent to $2.27 million on a 19 percent increase in revenue to $49.6 million.

The dividend has a record date of Oct. 17, when the offer to Turners' shareholders closes, although it may be extended by Dorchester or the Takeovers Panel.

Shares of Dorchester fell 2 percent to 24.5 cents and have gained some 14 percent this year, while Turners stock last traded at $3.11 and gained 27 percent.

(BusinessDesk)