Second McPherson’s bid ups pressure on Gallin’s Raphael Geminder
Will Gallin’s billionaire packaging mogul consider increasing the bid for McPherson’s after another suitor emerges?
Pressure is building on billionaire packaging mogul Raphael Geminder to up his $177m offer for McPherson’s after pharmaceutical player Arrotex Australia submitted a higher takeover offer on Thursday, despite McPherson’s releasing a soft trading update.
Arrotex’s indicative $1.60 per share offer sits at a 19 per cent premium to the $1.34 offer from Mr Geminder’s company Gallin. Gallin’s offer has been rejected by the McPherson’s board as “utterly opportunistic” for undervaluing the kitchen essentials, health and wellness products company and its potential.
Earlier this week, Mr Geminder indicated he would only increase his offer in the case of a competing proposal.
In a statement accompanying a long-awaiting trading update on Thursday, McPherson’s said Arrotex offered to acquire the company via a scheme of proposal subject to a number of conditions including a unanimous recommendation of the offer by the board, a break fee payable to Arrotex and the completion of a four-week due diligence process.
In addition to the $210.6m offer, Arrotex has stated it is open to the McPherson’s Board declaring a fully-franked special dividend payable to shareholders as part of the indicative offer price at the completion of the deal.
The McPherson’s board said it will now work with Arrotex to develop a transaction that can be put to shareholders, while chairman Graham Cubbin reiterated the board’s rejection of Mr Geminder’s offer.
“The McPherson’s directors remain of the unanimous opinion that the Gallin offer does not reflect McPherson’s underlying value nor its strong core brand portfolio and its market position as a leading supplier of health, wellness and beauty products in Australasia and China,” he said.
But the trading update also released on Thursday highlighted “abnormally low” export shipments of the group’s flagship Dr. LeWinn’s skincare product into China, which McPherson’s previously attributed to a build up of inventory and “unpredictable and sporadic demand from Access Brand Management (“ABM”), its exclusive Dr. LeWinn’s brand partner in China,” despite actual sales of the product holding up.
On Thursday, McPherson’s said as a result, sales to ABM will fall from $37m in FY20 to $8m in FY21 “as Q4 volumes are based around new product volumes and selective replenishment only – given the stock-weight remaining in the supply chain”.
It also said this would likely impact full year profit and revenue despite a forecast 3 per cent increase to domestic sales.
Total full year sales revenue for the group forecast to decline from $222m in FY20 to the range of $200m to $205m, the company said, with underlying earnings to land in the $10m-$13m range.
McPherson’s managing director and CEO Grant Peck said he still had confidence in the Dr. LeWinn brand.
“In difficult market conditions, the brand remains a strong participant in the ABM portfolio and together with our partners we have continued confidence in its ongoing relevance and appeal to Chinese consumers,” Mr. Peck said.
The company also provided an update on its balance sheet, with forecast net bank debt for the year to be in the $4m-$8m range at the end of the financial year.
“Consequently, the group intends to retain its dividend payout policy for FY21 and into the medium term,” McPherson’s said.
The trading update comes days after Mr Geminder’s Gallin blasted the McPherson’s board for not being transparent with shareholders on the company’s recent performance.
“Despite numerous requests, McPherson’s has refused to provide shareholders with any clarity around current or future trading performance, which raises a number of serious red flags regarding the outlook,” Gallin director Nicholas Perkins said on Tuesday.
Gallin has also criticised the McPherson’s board for recommending shareholders not vote on Mr Geminder’s offer until the release of an operational review, accusing the board of attempting to push its release past the close of the offer period on May 10.
On Thursday, McPherson’s confirmed the review will be presented on May 19.
McPherson’s, which is in a trading halt, last traded at $1.41 per share.
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