Early on Monday morning Bapcor Ltd (ASX: BAP) announced it has raised its takeover offer for New Zealand's Hellaby Holdings Ltd to NZ$3.60 per share.
In September, Bapcor, the owner of automotive brands such as Burson and Autobarn, announced an offer to purchase Hellaby for $NZ3.30 per share, an 18% premium to the average price over the trailing three-month period. Bapcor said the takeover of Hellaby represented an optimal strategy to enter New Zealand's automotive market.
However, in November, Hellaby's directors made an announcement instructing shareholders to reject the Bapcor offer as it materially undervalued the company. According to Hellaby's independent expert's report, the fair value for Hellaby's shares lay between $NZ3.60 and $NZ4.12.
Joining forces with Bapcor, one of Hellaby's largest investors criticised the board for using growth targets that were "highly aspirational". Bapcor further stoked the fire by saying the Grant Samuel report overstated the full value of Hellaby because it excluded head office costs.
However, with today's revised offer price at the low end of the expert's range, it is clear Bapcor either tried to get away with the deal too cheaply, or it simply wants to get the deal done.
Foolish takeaway
Much to the delight of the market, Bapcor, formally Burson Group, has been on a buying spree since listing in 2014. Indeed, so far the deals it has done appear to be well timed and executed.
However, it is important for investors to ensure the company is not seeking growth for growth's sake and that the company pays a good price for all acquisitions. From my experience, empire building usually ends in disaster.
That said, if Bapcor gets the Hellaby deal over the line with its latest offer it may appear to be a savvy move by management.
