Trilogy International cornerstone shareholder Business Bakery will foot the bill for some of Citic Capital Partners' costs arising from the Chinese investor's $211 million bid for the NZX-listed skincare products and scented candle maker.
Auckland-based Business Bakery, whose principal Grant Baker chairs Trilogy, has already thrown its weight behind the Chinese offer of $2.90 a share, and today said it's agreed to pay certain transaction costs connected to Citic's proposed takeover.
Trilogy shareholders will vote on whether to accept the deal at a special meeting in Auckland tomorrow. The offer is via a scheme of arrangement, meaning it needs 75 per cent support at the meeting and at least half the total voting rights cast.
The "agreement does not impose any additional obligation or requirement on any other TIL shareholder", the company said.
"The independent directors of TIL are currently considering the implications of the announcement and will update the market further as circumstances require."
Trilogy yesterday warned annual earnings could miss guidance by as much as 10 per cent due to weaker than expected sales of its Ecoya branded candles in the fourth quarter, and uncertainty over the timing for orders of Lanocorp beauty products.
Citic's offer fell within Grant Samuel's valuation range of between $2.59 and $2.94 per share, and was 28 per cent higher than the $2.26 price the shares were trading at before the offer, a level the independent adviser report said was close to the average premium offered in successful takeovers of listed companies.
The company's shares were trading down 0.4 per cent at $2.81.
Grant Samuel's report said if shareholders rejected the offer, Trilogy would remain a listed company. 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.
"A consideration for Trilogy shareholders is whether, in time, an investment in Trilogy will yield a higher value outcome than the proposed scheme," the report said. "If Trilogy can deliver on its initiatives and return to the earnings growth it experienced in 2016, then higher value outcomes may eventuate."
The deal includes a $2m break fee for Trilogy if a rival bid emerges and is completed, while Citic faces a $1m 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.
At the time of the report, Trilogy planned to enter into consultancy agreements with Steve Sinclair and Grant Baker, with Citic suggesting the skincare products maker pay the same amount of director and consulting fees as it did in management fees to Business Bakery, including potential for renegotiation. Business Bakery received $330,000 in the March 2017 year.