Allco woos shareholders of Baycorp in takeover bid

MELBOURNE - Investment fund Allco Equity Partners has urged shareholders of debt management and credit information firm Baycorp Advantage to accept its A$470 million ($529 million) proportional takeover offer.

Upon acceptance, Allco could start its reform program for Baycorp as soon as possible.

As Allco released its bidder's statement yesterday, Allco chairman David Coe said in a letter to Baycorp shareholders that the performance of Baycorp had been disappointing and its share price had lost ground.

"We believe the leadership of the company needs to be changed," Mr Coe said.

He said Allco would bring a proprietal focus which had been lacking at Baycorp and seek to rapidly drive change through value-creating initiatives.

"We would like to start our proposed program for change at Baycorp as soon as practicable and urge you to accept our offer without delay," Mr Coe said.

Allco said it plans to invigorate the Baycorp's core credit bureau business, to review under-performing assets and introduce capital management discipline.

Baycorp pointed out that its share price had surpassed the takeover price on offer from Allco as it again told shareholders to reject the bid.

Allco last week made an unsolicited proportional takeover offer for 50 per cent of all Baycorp shares not owned by it, at A$3.50 ($3.93) per Baycorp share. Baycorp shares closed up 3c in New Zealand at $4.29, well ahead of the bid price.

If the offer succeeds, AEP will propose a capital return by Baycorp of A$269 million or A$1.18 per Baycorp share.

The takeover offer is conditional upon AEP obtaining a minimum of 50.1 per cent of Baycorp shares.

Baycorp reaffirmed advice to shareholders to take no action in relation to the takeover offer.

Baycorp chairman Glenn Barnes said the company would provide a formal response to shareholders in the target's statement, towards the end of the month.

Mr Barnes noted that Baycorp's current share price - up two cents to A$3.86 today - represented "a significant premium" to Allco's offer price.

Baycorp has defended its track record and future business prospects in the face of the Allco bid.

Allco said in its bidder's statement that its proportional offer would ensure that Baycorp remains listed on the Australian Stock Exchange .

Baycorp shareholders would also retain 50 per cent of their Baycorp shares which would allow then to share in any future upside in the business.

Allco said that if its offer succeeded it would seek the appointment of at least four new directors to the Baycorp board, including Allco chief executive Peter Yates.

It was Allco's intention that the four new directors would constitute a majority and several existing Baycorp directors would therefore have to resign.

Allco said it intended to cause Baycorp to review its senior management, and all operations and circumstances, including potential acquisitions and the sale of under-performing assets.

Allco did not anticipate that there would be further distributions to Baycorp shareholders in the 2006 financial year after the capital return of A$1.18 per Baycorp share.

Allco considered that the appropriate level of dividends following the 2006 financial year would be within 50-70 per cent of available profits.

Allco said Baycorp's debt management business had not been a key contributor to profits and should be restructured.

It could be merged with a similar business to gain scale or be sold.

Allco said its voting power in Baycorp was 17.03 per cent.

- AAP