Nuplex shareholders OK $1 billion Allnex takeover

Sixty-four years after it was founded and 49 years since it listed on the NZX, New Zealand-based global resins company Nuplex Industries [NZX: NPX] is set to pass into the hands of private equity-backed Belgian company Allnex following a shareholder vote today.

Proxy votes filed to the NZX and ASX this morning made Allnex's $1 billion takeover bid a fait accompli ahead of today's vote at Nuplex's special meeting of shareholders where many long-time investors expressed their disappointment at the change of ownership just when the company was starting to show good returns from their support.

At least 75 percent of the votes cast and more than 50 percent of the total number of Nuplex shares were needed for the takeover to proceed. That is less than the typical threshold required because it was made under the first scheme of arrangement of a significant size since law changes in 2014.

Independent directors had recommended shareholders accept the offer of $5.55 per share, which includes the 12 cents per share interim dividend already paid. That was a premium of 44 percent to the share price at the time the offer was made in February. The board had rejected three previous Allnex offers, which first approached Nuplex in October last year.

Chairman Peter Springford told shareholders today the board felt obliged to put the final offer before them, given it was a premium to the share price, which has since risen to $5.30, and was above analysts' valuations. An independent report by Grant Samuel said the company's underlying value was in the range of $5.36 to $5.86 per share.

Shareholders' Association chairman John Hawkins, speaking in his private capacity as a shareholder, said the offer was not a great deal for Nuplex shareholders despite the premium, which was only 15 percent above the share price at the end of last year.

The share price of technology companies were marked back substantially in January, a situation that has since reversed, he said. He accused the board and management of bailing out rather than being "willing to do the hard yards to grow a good company into a great company".

"If other boards adopted the same approach we would never have had Microsoft, Google, or Bayer Chemicals," Hawkins said. "Allnex has been very smart in buying an increasing earnings stream and new technology at a modest premium even before the value of the synergies are taken into account."

When asked by shareholders if the two companies were such a good fit why the Nuplex board hadn't tried to take Allnex over, Springford said they had considered it three years ago when the balance sheet was not as strong as it is today and felt the financial risk and need to raise more money from shareholders would not have been acceptable. "We would have loved to have done it," he said.

Broadcaster and shareholder Michael Wilson questioned why the offer didn't include paying a final dividend which would have been around the 17 cents per share mark but Springford said the board wasn't able to negotiate that. One of the conditions of the offer was that the directors agreed to sell their shares.

Richard Oliphant, whose 97-year-old mother Rona was the first shareholder in the company and whose family members combined have a substantial shareholding, said they had gone through "some thin times and some buoyant times" and were "not making a killing" out of the Allnex offer, despite their loyalty and long-time support.

The scheme still requires High Court approval and is taking longer than expected to receive anti-trust clearance in the European Union. If the acquisition is not completed by Aug. 2 because of the clearance delay, the company has to pay a compensatory dividend of 0.075 cents per share to shareholders for every day of delay in addition to the $5.43 cash offer. The final deadline for getting all approvals is Nov. 9. unless both parties agree to an extension.

Nuplex had a run of profit downgrades and shareholder bailouts from 2009 but its financial results turned around last year after cutting back its operations in Australia and New Zealand and focusing solely on global resins. In May, the company said the 2016 financial year earnings before interest, tax, depreciation and amortisation were expected to be between $157 million and $161 million, more than the previous guidance of $145 million to $157 million announced in February. The company said it was in a strong position to achieve an annual return on funds of greater than 16 percent by the end of the 2018 financial year.

Last year the company launched a breakthrough coating technology, Acure, which had an estimated global market opportunity of US$1 billion to US$2 billion per annum and is expected to become a significant contributor to Nuplex's earnings.

Nuplex shares rose 2.1 percent to $5.29.