Paintmaker Wattyl soars on Allco bid

SYDNEY - Investment firm Allco Equity Partners (AEP) has made a A$275 million ($300 million) offer for paintmaker Wattyl, its second takeover target this year.

But unlike its previous tilt at former New Zealand credit company Baycorp Advantage, AEP is vying for full ownership of Wattyl with a A$3.25 per share off-market cash offer.

"We believe this offer represents full value and the certainty of cash for Wattyl shareholders after a prolonged period of underperformance," AEP managing director Peter Yates said.

The offer represents a 30 per cent premium to Wattyl's average share price during the month to December 5, the day AEP first approached the firm.

The board of Wattyl will meet in coming days to consider the offer.

"In the meantime, shareholders are strongly advised to take no action and not to sell their shares," the company said.

The AEP offer is higher that an earlier conditional offer, which was rejected.

Wattyl reported a A$10 million net profit in 2004/05, an improvement on the previous year's A$28.3 million loss.

However, managing director John Nolan told shareholders at Wattyl's October annual general meeting that the firm is expecting a lower first half result amid a shrinking housing sector and higher raw material costs.

AEP said it had not approached Wattyl substantial shareholder Deutsche Asset Management - which is also a cornerstone investor in AEP - about purchasing its Wattyl shares before launching the takeover.

"In the case of Wattyl we made a decision not to buy any shares before we made the offer," he said.

"We're not interested in Wattyl shares at this sort of price unless we can take control of the company and take responsibility for the restructuring process ourselves."

The bid - which is conditional on AEP acquiring at least 50.1 per cent of all shares - lifted Wattyl shares by 46Ac or nearly 16 per cent to A$3.36 while AEP's partly-paid shares were unchanged at A$3.

Yates said AEP would conduct a detailed review of Wattyl's operations, in conjunction with partner De Fazio Services, after the offer was completed.

The AEP bid follows the company's failed hostile takeover bid for Baycorp this year, which left the investment firm with a 17 per cent stake in the credit business.

AEP bought most of its Baycorp shares before announcing a proportional takeover in July.

"Baycorp has proven to be a very good investment for AEP ... We're very happy with that," Yates said.

AEP raised A$550 million before listing last December with a mandate to invest in private equity and public market opportunities.

"We have continued and continue to look at listed and unlisted opportunities," Yates said, "and there are a number of unlisted assets we are currently negotiating to acquire at the moment."

- AAP