DuluxGroup sweetens Alesco offer

Will investors like the new deal?

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published July 23, 2012 2:19 pm AEST

DuluxGroup Limited (ASX: DLX) has today announced that it has upped its offer for building and renovation product supplier Alesco Corporation Limited (ASX: ALS). The new offer is for $2.05 cash per share, plus allowing Alesco shareholders to receive up 18 cents in franking credits attached to any dividends declared by Alesco.

The 18 cents in franking credits would require Alesco's board to declare a 42 cent dividend per share.

In what is a slightly complex change, should Alesco declare the 42 cent dividend, the cash component offered by DuluxGroup would be adjusted to $1.63 in cash, plus the 42 cents in dividends from Alesco (plus 18 cents in franking credits). DuluxGroup also declared that this will be the company's last and final offer.

Alesco has indicated that it is not willing to support the revised offer, but also unwilling to indicate at what level it would recommend the offer. Alesco's independent expert has valued Alesco's share between $2.23 and $2.52. DuluxGroup's new offer comes in at the bottom of that range.

Alesco is due to report its full year results tomorrow, 24^th July 2012, but as the board doesn't support DuluxGroup's offer, it appears unlikely that the company will declare a 42 cent dividend. As a comparison, Alesco paid 13.5 cents in dividends in 2011.

DuluxGroup shares were unchanged in early afternoon trading, while Alesco's shares were up 1% to $2.06.

In other takeover news, hedge funds and speculators are betting APA Group (ASX: APA) will up its offer for Hastings Diversified Utilities Fund (ASX: HDF). APA has bid 0.326 APA shares plus 42.5 cents cash for every HDF share. At Friday's close, the offer was worth $2.04, but is a long way short of the offer by Pipeline Partners Australia of $2.325. HDF shares are currently trading at $2.48.

APA received Australian Competition and Consumer Commission approval on the 19^th July 2012 to takeover HDF, on condition that APA agreed to sell its Moomba to Adelaide pipeline. The same day, APA announced that it was extending its offer period for HDF shareholders, but at the time did not increase its bid.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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