Raph Geminder’s takeover bid for Pact remains out of the money

Entrepreneur Raphael Geminder.

The corporate equivalent of the game of “chicken” is now being played out on the share register of $237m packaging company Pact Group, majority controlled by millionaire Raphael Geminder and a range of hedge and arbitrage funds.

It was late last month that the company’s non-executive chairman Mr Geminder, whose claims to being a billionaire have been severely dented by the collapsing share price of Pact, launched a cheeky bid to take the company private from the ASX and trigger a large restructure behind closed doors.

We say cheeky because Mr Geminder’s private investment vehicle Kin Group is offering 68c per share in its off-market takeover bid and attempt to mop up minority shareholders, which was only half of one cent above the share price when the bid was made, and the share immediately shot up, with the offer continuing to be underwater since that day.

When the takeover bid was revealed the hedge and arbitrage funds rushed in, hoping for a better bid, pushing the shares as high as 74c and well above the offer from Geminder. If the price stayed there it would surely kill off the takeover completely.

The shares have since drifted lower, but are stubbornly staying above the offer, closing at 69c on Tuesday.

Now the game of chicken begins, with the offer closing on November 8 and both sides holding out. The hedge and arbitrage funds will be hoping for some good news on the corporate front, the economy (unlikely) or at least minority shareholders refusing to sell into an offer that is 2c or 3c below what they can get on the market.

Geminder has played this game before, and at other takeovers for McPherson’s and The Reject Shop he refused to come back with a higher bid.

But then for minority shareholders it becomes a case of what is the future for Pact amid a global economy that looks increasingly shaky - should they just take the money and run or stick with Pact and force Geminder to at least keep the company public.

Further pressure on investors will emerge in coming days and weeks as proxy advisors for Geminder begin calling around shareholders to see if they will take the 68c per share takeover offer.

If Geminder wants to remove the Pact business from the ASX, essentially privatising it, he will need to get to at least 75 per cent ownership by winning over minority shareholders and the few institutions on the share register to his off-market takeover bid. 

However, even then at 75 per cent he will need to apply to the ASX for that approval and many investors would likely lobby hard against any such move.