SAI had offered Espreon shareholders a sweetened deal of one SAI share for every 4.4 Espreon shares if at least 90 per cent of shares were acquired by February 27. Latest figures show that SAI holds 45.48 per cent of voting power.
The competition watchdog's informal review of SAI's proposed acquisition was commenced on January 14 by merger investigators Jason Byrne and Brett Morris. The ACCC has set February 25 as the date it will announce its findings.
This latest announcement comes as a disappointment after SAI's offer, which valued the target at 52 cents a share based on SAI's closing price of $2.50 on January 9, was welcomed by Espreon on January 13.
The SAI deal favourably compared with a rival offer from Melbourne-based private investment firm Vectis Group, which was offering 45 cents a share in cash.
Vectis, which used to compete with Espreon before selling parts of its business to SAI Global several years ago, first made an offer to Espreon in June of last year – plonking 65 cents a share on the table, or $62 million, before the market went south.
In a signal that Vectis, led by prominent Melbourne businessmen Alan Schwartz and Jacob Weinmann, wanted to re-enter the sector, Stephen Cooper and Cam Stewart from Grant Samuel were hired to advise on a scheme of arrangement, as were Craig Semple and Nicola Charlston from Mallesons Stephen Jaques.
Espreon responded by hiring Robert Fraser from TC Corporate, along with legal firm Baker & McKenzie to advise on its options. The Espreon team managed to subsequently force Vectis to raise its offer by an extra $5 million, or 5.5 cents per share, but then that offer was withdrawn, with negotiations returning to the original proposal of 65 cents a share.
Yet it didn’t stop there. That number was reduced again to 62.2 cents a share in August and to 44 cents in October. By November negotiations were over and the parties agreed to disagree and go their separate ways. It was thought at the time that accounting software giant Reckon would put in an alternative bid. Vectis had, after all, planned to spin off a portion to Reckon had the deal gone ahead.
However, the day of 'Reckoning' never arrived and Vectis subsequently went hostile, this time reducing its offer to 40 cents a share, increasing to 42 cents if it managed to get full control. Espreon dismissed it as inadequate, opportunistic, uncertain and highly conditional, and a “waste of time and money”. Espreon had, after all, already spent $1 million of cold hard cash on advisory and legal fees for the original scheme of arrangement proposal.
Major Espreon shareholders Hunter Hall (19 per cent) and LUT Investments (12 per cent) had also refused to agree to the deal. Institutional shareholders, including Dick Pratt’s Thorney Holdings control a combined 48 per cent of Espreon.
Vectis’s offer was subsequently increased to 45 cents cash before SAI, advised by Macquarie Capital and lawyers Gilbert+Tobin, came onto the scene. The rest, as they say, is history.
But now, with SAI throwing this latest spanner in the works, what can history teach us? Don’t look a gift-horse in the mouth? Probably, but it’s not over yet. SAI are due to issue their notice of status of conditions this Friday.
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