KEY POINTS:
The finance arm of Fisher & Paykel Appliances is to remain with the company after it failed to find a suitable buyer.
Fisher & Paykel announced yesterday that it was keeping the finance arm after assessing interest from bidders who conducted due diligence on the business.
"We said
at the beginning of this process that FPA would only divest the finance business if value exceeded our internal valuation. This disciplined approach has not resulted in a sale and is a decision that we are very comfortable with," said chief executive John Bongard.
The company has had a number of unsolicited expressions of interest to acquire the business over the past few years and announced last November that it would gauge how strong that interest was.
More than 10 parties were said to be interested, including banks and private equity groups. But GE Finance was seen as the front-runner for F&P Finance, which has a book value of more than $200 million and includes the Farmers finance division acquired in 2003.
Macquarie Equities investment adviser Arthur Lim said the announcement was not a surprise. "Given the financial company market environment, our thoughts really are that it would have been remarkable if the deal had actually gone through.
"In today's sort of environment, the likelihood was that if Fisher & Paykel accepted an offer, it would have been a low-ball offer and that's really not in the best long-term interests of Fisher & Paykel."
The timing of the decision to open up for competitive bidding was not good.
"From the time they were approached to today, I think the finance company sector problem has probably deteriorated further rather than improved," Lim said.
Forsyth Barr analyst Guy Hallwright agreed. "Finance companies are not flavour of the month, I would imagine.
"Even though I think the Appliance finance company is doing okay, it's obviously not an environment in which anybody's paying up for any asset.
"They probably wanted a reasonable premium, and I'm sure they did get offered a premium but it was probably less than they'd thought."
Keeping the finance arm was not necessarily a negative.
"They're not in any need of selling the finance operation. The process was started because they started getting a few approaches from people. They didn't actually go out to decide they had to sell the finance arm," Hallwright said.
Bongard said it was business as usual. It would continue with the existing plan to grow the Q card and Farmers card products.
F&P Appliances shares shed 8c to close at $2.30.
