Hostile takeover bid by Sydney-based private equity firm may be to the long-term detriment of horticulture industry
The Board of Brisbane Markets Limited (BML) has described the hostile takeover bid by Produce Markets Queensland (PMQ) as a self-interested attempt to control the Markets, a move that could be to the Queensland fruit and vegetable industry’s long-term detriment.
BML today released their Target’s Statement, which details the Board’s analysis of the $3.50-per-share bid and their recommendations to shareholders. An Independent Expert’s Report prepared by BDO Corporate Finance (QLD) Ltd accompanies the Target’s Statement.
Three separate recommendations have been provided to shareholders:
1. The Board unanimously recommends that Shareholders with business or other interests in the Markets, and/or those who have a medium to long term investment horizon and higher risk tolerance, should consider rejecting the offer
2. The Board unanimously recommends that Shareholders with no business or other interests in the Markets (that is, their only interest in the Brisbane Markets is their BML Shareholding) and/or who have a short to medium term investment horizon and lower risk tolerance, should consider accepting the offer (in the absence of a superior proposal)
3. The Non-Brismark Directors (Tony Kelly, Bruce Hatcher and Stuart Lummis) unanimously recommend that Brismark reject the offer (Recommendation 3).
The full reasons for each of the recommendations are set out in the Target’s Statement, and the Board recommends that shareholders read that document in full together with the accompanying Independent Expert’s Report.
Commenting on Recommendation 1, Chairman Tony Joseph said: “This advice takes into account the fact that shareholders with interests in the Markets enjoy significant advantages given BML’s long and deep understanding of the industry and a shared commitment to the Markets’ long-term future and development.”
“It reflects the risks for tenant Shareholders if control of the Markets was handed to a private equity firm, who is potentially only motivated by a quick financial return. There is a risk that in order to generate such a quick financial return, that costs for tenants could be increased or services for tenants could also be reduced.”
Commenting on Recommendation 2, Chairman Tony Joseph said:
“This advice is directed at shareholders who have purchased shares primarily for investment reasons — for example because of BML’s strong half-yearly dividends and strong capital growth — and do not have any long-term interest in or connection with the Brisbane Markets, and/or who have a short to medium term investment horizon and lower risk tolerance.”
“The Independent Expert’s Report by BDO determined that as at the date of the report, the offer of $3.50 per share falls within the valuation range of $3.32 to $4.23 per share for BML shareholders (other than Brismark) on a controlling basis including the impact of the value attributed to the Industry Shares (Valuation Range) and that the offer is both fair and reasonable to shareholders (other than Brismark).”
“Shareholders should note that the Board’s decision to recommend acceptance in these circumstances was made after much deliberation and was at the margin given the offer price is towards the low end of the Valuation Range.”
This means that shareholders whose primary objective is a financial return or who have a short to medium term investment horizon and lower risk tolerance, and who are confident that the conditions on which the $3.50 Offer is made can be met, will receive a fair price, albeit at the lower end of the Valuation Range.
Mr Joseph described PMQ’s hostile takeover bid as “one of the most significant issues faced by the industry in a generation”, and said it was critical that each Shareholder made an informed decision that considered their individual circumstances.
Since acquiring the Rocklea Markets from the Queensland Government via public tender in 2002, BML has steadily added value to the business. Total assets have grown from $86.0 million at 30 June 2003 to $243.7 million at 30 June 2015, and last financial year BML delivered a record $8.41 million net operating profit after-tax and a 12.5-cents-per-share dividend, also a record.
“PMQ is entirely owned by a Sydney-based private equity firm with no genuine links to fresh food wholesaling and no apparent interest in the long-term viability of the Brisbane Produce Markets or the wholesalers, growers and retailers who rely on them for their livelihoods,” Mr Joseph said.
“Unfortunately, there has been a great deal of misleading and incorrect information put out into the marketplace by PMQ,” he said.
He said it was critical that information on which Shareholders based their decision was credible and accurate.
“I urge shareholders to read the Target’s Statement, that was mailed to them today and also available on BML’s website, to fully understand the implications of the PMQ takeover bid for them and, in the case of wholesaler shareholders, for their future in the Markets,” he said.
Shareholders are also encouraged to seek independent financial and taxation advice before making a decision.
Mr Joseph also emphasised that the $3.50 per Share offered was conditional on PMQ being able to implement changes that would fundamentally alter the structure and operations of BML, including removing the fresh produce industry’s influence on the Markets in which it operates.
“Shareholders should remember that our primary objective in buying the Brisbane Markets from the Government just over a decade ago was to ensure we had an appropriate level of control on their operation, management and development, so we could have say in our own destiny,” he said.
As at the date of the Target’s Statement:
− BML shareholders who hold in aggregate 28.24% of the shares in BML do not currently intend to accept the offer (however reserve the right to do so in the case of a material increase in the offer price); and
− Brismark, who holds in aggregate 33.89% of the shares in BML, currently sees no reason to change its consistent position to not support the offer, while also acknowledging its statutory obligation to receive and review the Bidder’s Statement and Target’s Statement and reserves its right to change its position should Brismark’s members resolve to accept the offer.
Brisbane Markets is being advised by Morgans Corporate Limited and HopgoodGanim Lawyers.
