KEY POINTS:
The takeover of potato products maker Mr Chips is a step closer after the majority shareholder agreed to accept the proposed offer from Simplot Australia - if it is made.
Sinclair Long Term Holdings, which holds 53.2 per cent of Mr Chips, has signed an agreement with food brand owner Simplot, committing itself to accepting an offer at or above $2.90 a share.
By law, once Sinclair accepts, the same offer will have to be made to other shareholders.
The agreement, released on the NZX yesterday, reveals that Simplot wants to hold around 60 per cent of Mr Chips.
To do so, it intends to make a takeover offer via a wholly owned subsidiary for all of the shares in Mr Chips, conditional upon 90 per cent acceptance from all shareholders, and a number of institutional shareholders agreeing to take up approximately 40 per cent of the Simplot subsidiary.
The offer is subject to due diligence and an adjustment to the price per share will take place to factor in a payment of a fully franked dividend.
Due diligence has to be completed by May 30, and Simplot will need to make an offer before the end of July 31.
Mr Chips chairman Graeme Edwards said it was a "lock-up agreement" between Sinclair and Simplot.
"Subject to due diligence, Simplot intends to make an offer. If it's over a certain amount, Sinclair is bound to accept it."
He expects an offer not long after the company's full-year results are announced in late May.
The process of assessing the Simplot offer by Mr Chips' independent directors would begin once a formal offer is made.
Shares in the company have surged since the chipmaker advised shareholders to hold on to their shares last month, as Simplot and Sinclair came close to reaching an agreement. Mr Chips closed at $2.20 yesterday, up 5c.
