Trilogy directors mull Business Bakery decision ahead of takeover vote

Grant Baker's The Business Bakery says it will help foot the takeover bill.

Trilogy’s [NZX: TIL] board says it is considering an announcement made by the skincare firm’s cornerstone shareholder that it will pay some transactional costs if the firm is to be taken over by a Chinese company.

Trilogy shareholders can vote on the scheme of arrangement tomorrow. CITIC Capital China Partners has made a $211 million bid for the NZX-listed lifestyle products company.

In a statement Trilogy says cornerstone shareholder The Business Bakery has agreed to pay some of the transaction costs and this doesn’t impose obligations on other shareholders. 

“The scheme is expected to proceed as previously indicated and remains subject to shareholders’ approval and Overseas Investment Office consent.”

The directors say they will “update the market further as circumstances require.”

Auckland-based Business Bakery, whose high-profile directors include Trilogy chairman Grant Baker and Moa founder Geoff Ross, owns about 30% of the shares in Trilogy. It has already thrown its weight behind the offer.

A vote will be held tomorrow where the transaction requires at least 75% support and a quorum of half of total voting rights.

Yesterday the candle maker warned earnings could drop as much as 10% after weak Ecoya sales.

The company said guidance for earnings before interest, tax, depreciation and amortisation (ebitda) would be $20 million in the year ending March 31.

At the time of the report's preparation, the Trilogy-branded skincare product range was performing below expectations while Ecoya, CS&Co and Lanocorp were in line or exceeding projections.

The deal includes a $2 million break fee for Trilogy if a rival bid emerges and is completed while Citic faces a $1 million break fee if it can't get regulatory approvals by May 31, unless an extension is agreed to. A failed vote doesn't trigger a break fee.

Shares in Trilogy were trading at $2.81 following the announcement, having lost 0.35% over the year. 


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6 Comments & Questions

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Can we assume it is only the two independent directors of TIL that are considering their position? The other 3 directors are all part of the Business Bakery. Hardly best practice corporate governance!!!

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Most unusual announcement this late into the takeover process.

Is CITIC thinking of pulling out?

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TBB must be pretty desperate to get this away. Makes you wonder what CITIC have started to see and maybe rethinking the deal..

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CITIC pulling out would send this stock below $2 as the market does not like downgrades and the latest downgrade is one too many for an ex-growth stock. Will CITIC renegotiate the price or allow the stock to fall and come back later? Interesting scenarios ahead.

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Accept $2.75 now or $1.75 next year

Fleas attached to this.
[Edited]

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This deal is in trouble obviously.
What matters though is what can be salvaged from it if the deal collapses
There does appear to be some smelling stuff around at present and the corporate governance is questionable.

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