MTF board says Turners offer undervalues lender, Heartland bid uncertain
The board of Motor Trade Finances [NZDX: MTFHC] has given lukewarm responses to rival suitors wanting to build a cornerstone stake in the auto lender, saying one undervalues the company and the other proposal is too uncertain.
The Dunedin-based financier has competing bids by financial services firm Turners [NZX: TNR] and bank Heartland NZ [NZX: HNZ], which each want to buy up to 20% of MTF. Heartland yesterday said it would trump Turners' offer of $1.15 a share, paying $1.50 a share for between 10% and 20%, and was still keen on mounting a full takeover bid. The rival bid emerged as Turners' offer draws nearer to its October 17 closing date.
MTF's board hasn't formed a view on the merits of Turners owning 10% of the company, but said the firm's offer was below its internal valuation range of $1.39-to-$1.71 a share. It noted that the offer represented a premium to the price the shares had traded at over the past year and presented an exit opportunity for shareholders who no longer originated loans with MTF.
Turners currently holds 218,452 MTF shares, amounting to almost 1% of the stock. It would need the support of the target's board to acquire a fifth of the company, because MTF's constitution has restrictions on holdings above 10%.
In relation to the potential Heartland bid, the board said it was uncertain whether an unconditional offer would emerge, as Turners could build up a 10% blocking stake to prevent a full takeover in the future, which would scotch further interest from the bank.
Heartland also made a full takeover bid contingent on MTF having no actual, claimed or potential liability for excess fees charged in 39 loan contracts originated by Sportzone between May 2005 and July 2008, in a case brought against the lender by the Commerce Commission. Sportzone had an agreement with MTF allowing the defunct motorcycle business to write credit contracts for buyers of motorcycles, and the case is set to be heard in the Supreme Court next month.
"In the board's view, Heartland's primary interest is in making a full takeover offer for MTF which, given the due diligence requirements and other issues that need to be resolved, cannot be made in the near term," chairman Stephen Higgs said. "The board's view is that Heartland is a competitor with whom we have no wider business relationship and the board is extremely unlikely to recommend a transaction that allows Heartland to own more than 10% of the voting shares of MTF [other than as part of a full takeover offer that was being recommended by the board for reasons of value]."
MTF has $40 million of perpetual preference shares listed on the NZX's debt market paying annual interest of 5.11%. The notes last traded at $70 per $100 face value.