Peet Limited (ASX: PPC) remained in a trading halt over night after announcing an off-market takeover bid for shares in CIC Australia (ASX: CNB).
After a pre-bid agreement, Guinness Peat Group PLC (ASX: GPG) has agreed to sell over 25 million ordinary shares in CIC to Peet, representing a 19.9% stake in the company. The group expects to accept the bid for its entire shareholding in CIC on or before 7 May 2013.
Peet will pay $0.60 a share for Canberra-based CIC but according to the Wall Street Journal will need to raise $130 million to fund the takeover. "The raising – led by Bank of America Merrill Lynch (NYSE: BAC) – is being conducted at A$1.15 a share, the company said Wednesday… It represents a 17.9% discount to Peet's last traded price".
CIC has contracts worth up to $148 million although the offer price represents a 13% discount to the group's net assets at December 31, it's only $0.005 above its share price at close yesterday.
Over the last 12-month period, Peet's share price has soared 66.7% to $1.42 but has been struggling to return to its highs of over $2.00 in the 2010/2011 calendar year. The company is currently developing land estates in WA, Vic, QLD, and NSW and Managing Director Brenden Gore says, "CIC's business – with its joint venture and co-investment relationships – complements our strategy".
Shareholders in Guinness Peat Group have enjoyed a healthy trading year with the stock price returning 24.4%. This investment company appears to have made all the right decisions this year but only time will tell if it has have made up for its poor performance over the past five.
Foolish takeaway
In the past 12 months CIC has remained profitable for shareholders, with a price to earnings ratio of 11.46 and a good business model — Peet appears to have made a worthy purchase. The capital raising will be pivotal in Peet's expansion in the future as it attempts to pay down debt and fund growth. Any short term drop in share price may warrant a buy as the company looks to the future for growth.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, 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. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Owen Raszkiewicz does not own shares in any of the mentioned companies.
