Citic launches takeover offer for Trilogy

Trilogy CEO Angela Buglass

Private equity giant Citic Capital China Partners is making a bid for Trilogy International, offering $2.90 a share for the candle and skincare company.

Trilogy’s board say depending on an independent apprasial report they intend to unanimously recommend shareholders to vote for the deal, which is structured as a Scheme of Arrangement.

The Business Bakery, Trilogy’s largest shareholder, intends voting its 31.2% in favour of the takeover.

The offer price represents a premium of 27.8% to Trilogy’s closing share price yesterday of $2.27 and a 28.1% premium to the three month volume weighted average share price as at 14 December 2017.

However, Trilogy shares have fallen 22.8% in the past 12 months.

The offer price values Trilogy at approximately $250 million on a total enterprise valuation.

Citic senior managing director Hanxi Zhao says Citic sees potential to boost Trilogy's global growth. She says they intend retaining Trilogy's Auckland head office and senior management team including CEO Angela Buglass. Director Stephen Sinclair of The Business Bakery will be retained as a consultant following the transaction. 

The proposal is conditional on the approval of Trilogy's shareholders, the High Court and the New Zealand Overseas Investment Office.

Trilogy chairman Grant Baker says the Scheme proposal provides certainty regarding the value of the shares.

“The Board remains confident that TIL is well positioned to deliver growth in earnings across each of its four businesses in the long term. Delivering this growth will take time and involves execution risks. Therefore, shareholders may find attractive the opportunity to realise the value of their TIL shares in cash now.” 

"Citic Capital is viewed as a good owner of TIL as it moves into its next phase of growth. In particular, Citic Capital's strong relationships in the Asian and US markets provide an opportunity to unlock the potential of these brands, and achieve faster growth globally," Mr Baker says.

A scheme of arrangement is a court-approved process which requires Trilogy to obtain approval from shareholders at a special meeting, with 75 percent of all votes casts in favour and at least 50 percent of the total voting rights cast.

In October, Citic boosted its stake in NZX-listed Tourism Holdings to almost 11 percent having emerged as a substantial shareholder in the motorhome operator earlier that month.

Trilogy shares peaked at $5 in August 2016. The stock was listed in 2010 under its Ecoya scented candle moniker, selling shares at $1 apiece to raise about $10 million. It jumped 21 percent to $2.75 when the NZX opened today, valuing the company at $200 million.


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15 Comments & Questions

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My first view of this was as a pretty mediocre offer pitched into the field by an overseas entity keen to leverage Geoff Ross' inability to exit due to liquidity and known persona for courting takeovers. It appears management doesn't have much choice as that stake respresents a massive voting block for approval of the price, which may be fair short-term, but doesn't put much value into successful future business execution and success.

On reviewing it, I hope Mr Ross recycles the money into further NZ ventures and helps boost NZ Inc. it's a given that MOA was never a raging success (well, that's an understatement), but I believe they have more successes than failures, and that the capital is better off going into further ventures rather than continuing to sit in TIL.

Back to the negative - the NZX continues its downward spiral as another quality NZ company leaves our hands and is delisted from our board. I believe we are now into more delistings than listings for 2017, during a global bull market, so when do we enter "crisis mode" in our capital markets? 2018 looks set to be a shocker...

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NZX is buggered
Looks like 'the highway or my way' Weldon management style (obviously wholeheartedly endorsed by the Board) is reaping the right results for the ASX (yes, ASX).

Count on ATM to leave the NZX next year.

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Good to see your comments. I am always deeply skeptical when I see boards recommend these types of takeover offers. I felt the same way about Tenon. It doesn't represent much confidence in their company's prospects as is or are there ulterior motives in play?

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The company is being acquired at circa 13x trailing EBITDA. That is an insanely high multiple. Shareholders and Board's would be equally as crazy not to accept the price. Sometimes irrational buyers come knocking paying stupid prices (that's their issue) - gotta accept it in the rare case it happens. At least its not being "stolen" off the exchange.

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13x TRAILING being the key word there. Last I checked they are still growing and expanding into other markets. Of course, execution risk there, but the company pays dividends to offset though.

Stop looking in the rear-view mirror if you want to get ahead!

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or even 'sceptical'.

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Spent a lot of time working with US clients mate. Don't hold it against me

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Congratulations to Geoff and the rest of the guys from the Bakery.

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Id say they would be right to accept the offer

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It's nice to see a few more pretty faces on these boards, instead of the usual old stuffed shirts.

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Sadly following Xero another lost opportunity for investors to invest in local stocks. NZX has around 100 if that stocks worth even looking at and only 40 worth investing in if that. And they include the big punts. The rest have the same chance as betting at Sky City.

ASX has 2000 to start with. It very hard for this old investor to try and convince the young folks to think about direct investing in their own bourse when you cant give them more than a handful of decent stocks to pick from.

Where are the cop-ops and larger private companies. Why are'nt they listed. Come on NZX speak up what have you done to get them ( pun intended) on board.

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Not a big supporter of NZX and its bunch of board misfits and clueless management BUT did you invest in Ecoya or Trilogy when it was a minnow?

If anyone did, they will appreciate that Trilogy had a hard time building up to the business which is being sold for over $200m today. It required vision, tenacity and relentless focus on brand building and growth.

For those who did not, it sadly reflects how offshore investors and offshore companies again see the opportunity for wealth creation so much better than local investors.

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are you talking about offshore investors investing in it when it was a minnow or this takeover bid? If the latter then your comment doesn't really add up

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Lets hope the new owners are NZ citizens or they won't be able to buy a house in NZ.

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The new owners are professional investors they are not investing to live here. This is the type of FDI that we want to attract.

Interesting the potential restrictions buying existing houses has not stopped the deal.....the doom and gloom merchants may have got this wrong.

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