The Business Herald’s markets and banking reporter.

Takeover bid 'flattering but big distraction'

Corporate takeovers are "the ultimate flattery" but dealing with an Australian bid for Hellaby Holdings is proving a major distraction to a strategic overhaul of the company, says managing director Alan Clarke.

The former Abano Healthcare boss, who joined Hellaby in November, has become something of a specialist in fending off buyout attempts, having dealt with three unsuccessful takeover approaches his previous employer received.

"The only reason someone wants to take you over is they see value ... it's the ultimate flattery," Clarke said.

He said takeovers "go with the territory".

"But I think it's a pity because all the energy and effort that goes into the process and if that energy and effort was pumped into the business, perhaps we could be achieving more."

Working in Hellaby's favour, though, was the fact that management of its various business units was able to stay focused on day-to-day operations while head office dealt with the takeover bid, Clarke added.

Victoria-based automotive operator Bapcor made a $3.30 per share offer for full control of the NZX-listed investment firm last month. Hellaby, which holds its AGM in Auckland today, has said the bid undervalues the company and is "opportunistic".

Investors have been urged not to sell and await an independent report from Grant Samuel.

Bapcor has said its offer represents "fair value".

It is eyeing potential synergies with Hellaby's automotive parts and services division and plans to divest its resources and footwear units if the takeover is successful.

Since taking the helm, Clarke has moved quickly to streamline Hellaby's portfolio by selling off the equipment division for $81 million to Maui Capital's Aqua Fund in a deal that settled on September 30.

The company also wants to divest its footwear businesses - Hannah's and Number One Shoes - in order to focus on its core resources services and automotive units.

That strategy is aimed at stopping Hellaby from being identified as an investment holding firm, a type of business that has fallen out of favour with market analysts. Clarke said Hellaby hadn't been doing the best job of "telling our story".

"The market had given up on Hellaby, mainly because it didn't understand or didn't like the story," he said. Hellaby shares slumped during 2015 and early 2016, to close as low as $2.45 on June 20.

But the stock has bounced back sharply since then and closed at $3.33 on Friday, 3c above Bapcor's offer price, suggesting the market is anticipating a higher bid from the Australian company.

Clarke said people he spoke to often commented that Hellaby was a great company, but didn't fully understand what it did.

"The reason behind that is that when you look at Hellaby's history, it has been an investment holding company for decades," he said. "That is like wearing bell bottoms and having big hair in 2016."

In October Hellaby reported a 30 per cent decline in annual profit, to $19.6m, having cut back earnings guidance earlier this year.

Salt Funds, ACC and Castle Investments, which collectively own 30 per cent of the firm, have given the takeover deal their seals of approval through entering a lock-up agreement to sell their shares.

Takeover target Hellaby Holdings

Divisions
• Footwear
Hannahs, Number One Shoes
• Resources
Contract Resources, TBS Group
• Automotive
Brake & Transmission (BNT), Autolign Diesel Distributors

- NZ Herald

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