City Pacific Limited (CIY) has withdrawn an offer for MFS Limited's (MFS) financial services division.
MFS shares tumbled almost 70% on Friday after it announced plans to split its financial services and tourism operations into two separate companies and raise $550 million from investors to reduce debt.
In a statement to the ASX, City Pacific advised that after reviewing the demerger proposal announced by MFS on Friday, it would withdraw its merger proposal.
The company contacted MFS CEO Michael King late on Friday, telling him that the offer would be withdraw, but confirmed it would still maintain an interest in either the business, or assets of the MFS financial services division.
"Discussions continued over the weekend and a draft proposal was submitted, however the parties were unable to reach agreement," City Pacific said.
"City Pacific confirms the withdrawal of the original merger proposal."
SHAW Stockbroking senior analyst Brent Mitchell said given the situation it was not surprising they want to sit back and review.
On Monday last week, City Pacific proposed to buy the MFS financial services business in a deal with an enterprise value of about $1.33 billion, through the issue of 225 million City Pacific shares at $3.70 a share and the assumption of $500 million in debt.
Shares of MFS were then pounded in trade on Friday, with three years of gains wiped, because of increased uncertainty about the structure of the company.
Mr Mitchell said it was difficult to predict how the share price would perform due the significant margin related selling.
"However we believe the underlying values is well in excess of the current price," he concluded.
On Friday, City Pacific closed down 24c at $3.21, while MFS was down $2.19 at99c.
MFS Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
