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Private equity's ongoing raid on publicly listed companies continued yesterday with a consortium led by Australian giant Pacific Equity Partners (PEP) getting a foot in the door at transtasman credit services firm Veda Advantage.
Veda, formerly Baycorp Advantage, yesterday said it had received a proposal to privatise the dual-listed company from a consortium comprising PEP and Merrill Lynch Global Private Equity.
In the past 18 months PEP and its partners have acquired New Zealand companies Tegel, Griffins, and Independent Liquor. It also owns A&R Whitcoulls and is believed to be working on a bid for The Warehouse with supermarket co-operative Foodstuffs.
The consortium proposes to pay A$3.61 a share for 100 per cent of Veda Advantage, less any dividends paid to shareholders before the deal is completed. The price is at a 20 per cent premium to the company's Monday close of A$3. Should it proceed, the offer values the company at approximately A$814 million.
Veda's shares rose 53c to A$3.53 on the ASX and climbed 58c to $3.90 on the NZX.
Veda said the proposal followed a period of "preliminary interaction" between its board and the consortium.
The board had agreed the proposal had sufficient merit to provide the consortium with due diligence access and a definitive proposal was expected within six weeks.
However Veda emphasised: "There is currently no proposal capable of the board considering recommending or putting to shareholders for consideration, nor is there any certainty that any binding proposal will be received from the consortium or any other party at any future time.
"Despite the ongoing nature of discussions with the consortium, shareholders should be cautious about whether any proposal will eventuate, including potential pricing."
PEP managing director Anthony Kerwick said the "significant work" on the proposal suggested "this is an interesting opportunity and the right kind of company for us to invest in".
Allco, which holds 17.3 per cent of Veda and a seat on its board, yesterday said it had noted the proposal, and would keep the market informed about its own position "as any material developments occur".
Allco made a A$3.52 a share offer for 50 per cent of the company in 2005 after acquiring a cornerstone stake from a New Zealand institutional investor. The bid lapsed in October 2005 after gaining little traction.
A source close to the current PEP proposal noted that it was at "a significant premium to the Allco bid on an adjusted basis".
It was also at "a very comfortable premium" to the valuation provided by independent experts Lonergan Edwards at the time of Allco's offer. The valuation was one of the grounds on which the Baycorp board rejected Allco's bid.
Baycorp's management defended the company against Allco's offer by promising hefty capital returns to shareholders.
Since Allco's failed bid, the company has returned about A$280 million to shareholders through capital returns and share buybacks. The latest capital return, a special dividend, followed the A$97 million sale of the BayCorp Collection Services business to a consortium comprising Allco and Deutsche Bank Capital Partner last May.
After the sale, the company changed its name to Veda Advantage but will continue operating under the Baycorp Advantage brand until the end of next month.
Consortium bid
* Pacific Equity Partners has teamed up with Merrill Lynch to bid A$814 million for Veda Advantage, the company formerly known as Baycorp Advantage.
* Veda Advantage's board has given the consortium the green light to perform due diligence.
* The proposed offer at A$3.61 ($4) a share is at a significant premium to Allco Equity Partners' failed A$3.52 bid for the company just over a year ago.
