Richfield directors reject takeover offer from Brierley's Mercantile

Richfield International's board has unanimously urged shareholders to reject a takeover offer from veteran corporate raider Sir Ron Brierley's Mercantile Investment.

The ASX-listed shipping firm received an unsolicited on-market takeover offer of 20 Australian cents per share from Mercantile on Dec. 23, which Richfield's directors say is materially inadequate, and doesn't reflect fair value for the shares nor include a control premium. The shares last traded at 20.5 Australian cents, where they closed on Dec. 31, having gained 135 percent last year.

The timing of the offer is "opportunistic" and Mercantile is trying to take advantage of the company's "proven profitability in the face of the global economic slowdown," the board said in a statement to the ASX.

Brierley-chaired Mercantile has increased its stake in Richfield to 23.6 percent from 19.9 percent, having built its initial holding from a forced sale in August when Australia's Takeovers Panel deemed a transaction breached disclosure obligations. It raised $1.4 million earlier this month in a discounted share placement to local wholesale investors, which it said it will use for general investment purposes.

Richfield's directors also took exception to Mercantile planning to replace non-executive directors if its takeover offer succeeds.

"There is no certainty that these actions will result in improved shareholder value. The RIS directors are not aware of Mercantile OFM having any track record in operating a global shipping business," they said.

"Your board is confident that, despite the recent economic slowdown in emerging markets, the company's business will remain strong due to the quality of its clients, its extensive experience and reputation in the shipping services industry and its skilled management team."

In its first-half report, released to the ASX in August 2015, Richfield said profit increased 71 percent to A$912,000 for the six months to June 2015, while its revenue rose 41 percent to AU $2.02 million. It did not pay a dividend.

Brierley seized control of ASX-listed Mercantile, then called India Equities Fund, in 2012 when shareholders agreed to a deal giving him 54 percent of the company and its chair in return for his stakes in Copper Strike, Trinity Group, ING Community Living Group, Australian Pharmaceutical Industries and Trojan Equity. The dual-listed shares were last at 15 cents on the NZX.

The takeover offer closes at 7pm Australian Eastern Daylight Time (5pm New Zealand time) on Feb. 8.

(BusinessDesk)