Battle to take over Baycorp intensifies

Credit-checking firm Baycorp Advantage yesterday advised shareholders to reject a revised hostile takeover bid from investment fund Allco Equity Partners (AEP).

Allco - which will own about 58 per cent of Baycorp if its bid succeeds - on Friday increased its offer by as much as 5 per cent, valuing the group at up to $A837 million ($926 million).

"AEP is opportunistically trying to gain effective control of your company without paying an appropriate control premium," Baycorp chairman Glenn Barnes said in a letter to shareholders.

"Your independent directors have reviewed AEP's revised offer carefully and unanimously recommend that you reject AEP's offer."

Yesterday's letter turns up the heat on what is already an acrimonious takeover stoush.

Allco has raised its bid by 2 cents in cash to $A3.52 ($3.85) a share and said Baycorp shareholders would have the right to retain an 8 cent dividend.

Allco also said it would lift its bid by a further 7 cents a share if the offer was declared free of all defeating conditions by September 22, taking the offer to $A3.67.

Baycorp commissioned Lonergan Edwards & Associates, which conducts valuations of companies, to review Allco's revised offer.

Adjusting for the dividend, Lonergan has valued Baycorp between $A3.84 and $A4.23 a share, Barnes said in the letter.

He said Baycorp was continuing to discuss its options with a number of potential alternative bidders but has received no commitments.

Allco currently has an unconditional 17 per cent stake in Baycorp after finalising an agreement with major shareholder Lazard Asset Management.

That gives it the clout to be a hostile minority shareholder to any prospective counter-bidder, and makes the possibility of a more attractive suitor emerging increasingly unlikely.

Allco has said it will declare its bid unconditional if it wins a 35 per cent stake alongside 50 per cent of voting rights.

Allco first launched its takeover bid - via subsidiary AEP Financial Services Holdings Pty Ltd - in late July.

Allco has said that if it gains control of Baycorp it will restructure the company, offer better management and return $A1.18 cash a share to investors.

Baycorp has struggled since the merger of New Zealand's Baycorp Holdings and Australia's Data Advantage in 2001.

In August, the company posted a profit of $A35.5 million for the year to June 30, compared with a loss of $A138.2m a year earlier when it was hit by big writedowns.

- NZPA