PPCS bid for Richmond on the rocks

PPCS's unsolicited takeover bid for Hawke's Bay meat processor Richmond looks to have sunk before it has been formally launched.

Richmond shares subsided another 10 cents to $2.75 today and the stock is now trading nearly 10 per cent below PPCS's $3.05/share offer price.

News yesterday that Graeme Lowe of Lowe Corp had grabbed an effective 10 per cent stake was a clear signal the bid was unlikely to succeed at the current price, brokers said.

Other substantial shareholders are either not behind the bid or downright hostile.

The PPCS bid is conditional on getting 90 per cent of Richmond shareholder support plus getting most of Richmond's bankers and financiers to continue backing the company.

Sharebroker Andrew McDouall said that with Mr Lowe's company taking a 10 per cent stake, "it would appear to eliminate the likelihood of PPCS's bid being successful."

Mr Lowe's Hastings leather company grabbed what is effectively a blocking stake yesterday.

He now controls 3.278 million Richmond shares, which amounts to 9.96 per cent of the voting capital when the 6.86 million shares the High Court in November ordered PPCS must forfeit are excluded.

Most of the stake is held in the name of Waiau Investments and most was bought from late December until yesterday at between $2.45 and $3.05 a share, the notice showed.

Mr Lowe said protecting his supply of by-products from Richmond was one of the reasons he bought the stake.

He would not say whether he would sell the stake if Lowe Corp got a supply deal with PPCS.

"We haven't decided where we stand yet. We're just investing money, that's all."

PPCS's offer statement to the Stock Exchange says the 6.86 million forfeited shares are not counted in determining the bid's 90 per cent acceptance threshold for PPCS to compulsorily buy the remaining shares.

The total number of shares considered in determining 90 per cent acceptance was 34.117 million, though there were 40.98 million ordinary shares on issue.

Another key shareholder, Roderick Pearce, the more than 90 per cent owner of Waitotara Holdings, which holds 8.67 per cent of the voting shares in Richmond, said it was too early to comment on PPCS's $3.05 a share offer.

He rejected market speculation he had sold some shares to Mr Lowe.

He said he was not surprised at the offer price as the company had been "seriously undervalued".

Richmond shares were trading at $1.70 before the November High Court ruling ordering PPCS to make a full takeover or forfeit the 6.86 million stake and lose its voting rights on the remainder of its holding (effectively 43 per cent after forfeiture).

Mr Pearce said he was still weighing up selling. He was not prepared to say until he had had discussions with fellow directors and shareholders what he would do.

He sold the Waitotara meat processing business to Richmond three years ago and was paid partly with shares in the company.

Mr Pearce would not say whether he thought the offer would succeed.

"You never know what people will do until they are confronted with cash."

Other key shareholders include farmer suppliers, who collectively hold about 9.5 per cent of voting shares, and staff who hold about 6 per cent.

Farmer James Aitken, who led the former Richold group of shareholders that was set up to block PPCS getting 100 per cent of Richmond, said the offer was unlikely to succeed. A lot of shareholders would not want to sell to PPCS.

"I'm not prepared to sell my shares at $3.05 to PPCS," he said.

If the offer came from another company, he might feel more inclined to sell.

"A lot of shareholders feel that way," Mr Aitken said.

He said about 1700 of the 2000-odd shareholders in Richmond were farmer-supplier and employees.

PPCS is simultaneously offering $3.50/share to Hawke's Bay Meat, which holds 36 per cent of Richmond and is 49 per cent owned by PPCS and 51 per cent by Active Equities. Active Equities had an option to sell at $3.50 dating back to June 2001. That date allows PPCS to skirt Takeover Code rules prohibiting differentiated offers introduced on July 1, 2001.

- NZPA