KEY POINTS:
Bacardi Ltd's bid for vodka company 42 Below is above the New Zealand company's full underlying value, independent advisers Grant Samuel and Associates have found.
In late-September Bacardi announced it was making a $139 million takeover offer at 77c a share.
In a report made public today Grant Samuel said the full underlying value of 42 Below shares was in the range of 59c to 74c a share.
The value was for all of 42 Below and included a premium for control, Grant Samuel said.
The Bacardi offer was 35 per cent above 42 Below's closing share price of 57c on the day before the announcement of the proposed takeover.
It was 40 per cent above the volume weighted average price of 55c in the six months before the announcement.
The offer came seven years after founder Geoff Ross, who has a 26 per cent stake, sold his first bottle of New Zealand-made vodka from his Wellington garage. Serious production of the vodka began in 2002.
Unanimously recommending shareholders accept the offer, 42 Below's independent directors said the offer provided investors in the 2003 initial public offering who had exercised their warrants, a compound annual return of about 17 per cent a year.
The Bacardi offer also provided a certain value to shareholders now, while, as with any growth business, external factors could materially affect the value of 42 Below shares in the future, the directors said.
In its offer document, Bacardi said it was excited about 42 Below's growth prospects.
"42 Below is unashamedly 'New Zealand in a bottle'," Bacardi said.
Asked why Bacardi should want this country in a bottle, company vice-president for business development Atul Vora said Bacardi had a portfolio of unique, premium and interesting brands.
"We are particularly keen and excited by the prospect of what New Zealand values bring to the premium spirits sector.
"We think it's a lovely combination of allowing people to enjoy premium spirits...and also to take them back to the nostalgia of what we believe represents New Zealand, the purity and the beauty of the country," Mr Vora said.
The world was already seeing vodka coming from various countries, such as Sweden, Finland and France.
"I don't think the world sees vodka coming from Russia only now ... We think the world is ready to have vodkas coming from different parts of the world because they all stand for very different things," he said.
"We think there's room at the table for a brand that is as unique and different as 42 Below."
But he also said the 42 Below brand was still young and Bacardi would have to invest large amounts of money, time and patience over the mid to long term to develop it into a brand that was known worldwide.
The Bacardi offer said the next stage of development for 42 Below required access to global distribution, marketing infrastructure and significant capital.
For the foreseeable future, 42 Below had no realistic prospect of dividend payments and would continue to incur trading losses.
Mr Ross and some other major shareholders, holding 52 per cent of 42 Below's shares, have entered lock-in agreements under which they have committed to accept the Bacardi offer.
Bacardi needs a further 38 per cent of shares to reach the minimum 90 per cent acceptance it needs for a takeover.
Grant Samuel said that, after the locked-in shareholdings, roughly 27 per cent of the issued shares were owned by the next top 20 shareholders.
The support of those shareholders for the Bacardi offer could be instrumental in determining whether Bacardi reached the 90 per cent threshold, Grant Samuel said.
The offer closes on December 15, unless extended.
- NZPA
