Bell Equipment minority buyout seems doomed to failure
The plan of IA Bell, the family-owned Bell holding company and principal shareholder of Bell Equipment, to acquire all of the issued shares in the JSE-listed heavy equipment maker that it does not already own for R10 one share and to delisting the company seems doomed to failure.
In a joint announcement released Friday, Bell Equipment and IA Bell have long announced that IA Bell has now given notice of its firm intention to make the offer through a plan of arrangement.
However, IA Bell stuck to its initial indicative offering price of R10 per share despite earlier criticism from minority shareholders that this significantly undervalues the company.
IA Bell has also not yet secured any irrevocable commitments from any of Bell Equipment’s significant minority shareholders to support the proposed transaction.
Bell Equipment had a net asset value per share of Rand 37.79 at the end of June 2021, its most recent financial results.
The firm intention announcement was released at 4 p.m. on Friday, with Bell Equipment shares slumping 13.23% or 1.97 rand during the day to close at 12.92 rand – but still 29 % higher than the offer price.
Carson Mitchell, a managing member of Shipyard Capital Management LLC, who had previously indicated that he controlled 1.2 million shares of Bell Equipment, said on Saturday that the offer of R10 per share of the Bell family was not ” not serious “.
“They do not have the votes to have a plan of arrangement approved, they have not obtained any commitments from any of the three institutional shareholders [Sanlam, Allan Gray, NinetyOne], and the bid price is below the market price, ”Mitchell said.
“Putting this offer on the market in the middle of a trading session was unwise, and I wouldn’t be surprised to see a lawsuit brought against the Bell board for clearing it. ”
Mitchell claimed that Bell Equipment president Gary Bell claimed at last year’s annual general meeting that the articulated dump truck (ADT) platform alone is worth at least R25 per share. and that the whole company is worth R36 per share or more “so it’s no surprise that he” I’d like to buy out minorities as cheaply as possible “.
He added that based on acquisitions in the space and trading multiples of Bell’s peers, he estimates the company would sell for between R50 and R80 per share in a sale.
“So rather than wasting shareholder funds by offering low-key deals, Bell’s board should retain the bankers and hold an open auction for the company,” Mitchell said.
He added that Bell Equipment makes ADTs, a sophisticated, niche vehicle that works in tandem with an excavator, and that there are half a dozen excavator manufacturers around the world that don’t have ADTs.
“Bell is the only ADT pureplay maker of any note. An auction here would be well offered, ”he said.
IA Bell now owns 70.1% of the issued share capital of Bell Equipment following its acquisition of 30 million Bell Equipment shares for R 10 per share from John Deere Construction & Forestry Company effective September 28, 2021.
Regarding the arrangement scheme, only the owners of 29.45% of the shares not already held by IA Bell or certain shareholders who are related or acquainted with the founders of Bell Equipment will be able to vote on the proposed scheme.
The joint announcement released on Friday indicates that an independent board of directors has been established to review the IA Bell offer and will distribute a circular to shareholders in due course proposing the plan.
The independent board of directors has appointed BDO Corporate Finance as an independent expert to express an opinion on whether the remuneration of the program is fair and reasonable for the eligible shareholders.
This notice will be provided with the circular.
As for the cash consideration of R 10 per share, the joint announcement released on Friday says it represents:
A premium of 118.3% over the closing price of the Bell Equipment share, and a premium of 88.4% over the 30-day volume weighted average price (VWAP) of the Bell Equipment shares, on the JSE of R4.58 on September 4, 2020, the last trading day before the date of publication of the disclaimer regarding the non-binding memorandum of understanding that was entered into between IA Bell and John Deere prior to the conclusion of the contract for sale of Deere.
An 8.7% premium on the closing price of Bell Equipment shares and a 2.25% premium on the 30-day VWAP of Bell Equipment shares, to the JSE of R 9.20 on March 9, 2021, the last day market prior to the publication of the announcement of the non-binding expression of interest of a possible transaction by IA Bell with a view to acquiring all the shares that it does not already hold.
A discount of 26.09% from the closing price of a Bell Equipment share on the JSE of 13.53 rand on October 5, 2021, the last trading day before the date of signing of the implementation agreement. ‘firm intention.
All the conditions of the scheme of arrangement must be met – or, where a deviation or adjustment is allowed, it must be agreed – by March 1, 2022.
The delisting of Bell Equipment, subject to the fulfillment of all conditions of the program, including approval of the program by eligible shareholders, will take place on March 15, 2022.
Moneyweb reported last month that the Financial Sector Conduct Authority (FSCA) has registered two investigations against Bell Equipment – one related to suspected insider trading and the other whether the company has published false statements , misleading or deceptive about the company or its securities in July. 2020.
This followed FSCA’s confirmation to Moneyweb that it had registered both investigations after receiving “more than one complaint”.
He said the insider trading investigation involved transactions in securities of Bell Equipment Limited executed during the period June 1 to September 30, 2020.
“Both investigations are ongoing and we are unable to provide further comments on this at this time,” FSCA said at the time.
Takeover complaint (s)
A complaint or complaints were also reportedly filed earlier this year with the Takeover Regulation Panel (TRP) regarding the conduct of Bell Equipment and Gary Bell, who is also the director of the family trust, in connection with the proposed acquisition of all actions. in Bell equipment not owned by IA Bell.
However, TRP Deputy Executive Director Zano Nduli pointed out last month in response to a question from Moneyweb that the TRP does not comment in the media on investigations that may or may not have been referred to it.
“The work we do is not only potentially market sensitive, but often also governed by the need to maintain strict confidentiality,” he said.