E&T close to selling out 17th February 2007, 7:00 WST Evans &...

E&T close to selling out
17th February 2007, 7:00 WST

Evans & Tate’s board last night succumbed to Yarraman Winery’s increased $148.3 million takeover offer, paving the way for control of the iconic West Australian wine producer to pass across the Nullarbor.

Directors of the embattled winemaker, including controlling shareholder Franklin Tate, agreed last night to conditionally recommend the Yarraman offer.

It is now up to Yarraman to accept the conditions by noon on Monday, which could lead to a merger implementation deal to be finalised by March 16.

On another day of last-minute drama, Yarraman presented its revised offer to Evans & Tate chairman John Hopkins at 4pm, an hour before an agreed 5pm deadline.

The improved offer values Evans & Tate’s debt and equity at $148.3 million. It also guarantees ANZ, which is owed $90 million by Evans & Tate, $80 million in cash as well as $17.3 million worth of unlisted convertible redeemable preference shares.

Short of giving the Yarraman offer the thumbs-up, Evans & Tate has made a counter-offer with exactly the same financial terms, but adding the conditions that its own ongoing funding requirements be guaranteed and that due diligence of Yarraman’s financial status is completed to Evans & Tate’s satisfaction.

If Yarraman accepts the conditions by the Monday deadline, due diligence will begin.

Evans & Tate left the door open for a rival bidder to enter the fray, demanding that due diligence be completed by March 2 and a merger implementation agreement entered into by March 16 for it to continue to pledge support to the Yarraman offer.

The exact terms of the share-swap proposed by Yarraman — believed to be one Yarraman share for every 6.75 Evans & Tate units — were not released. Yarraman’s initial approach, before Christmas, is thought to have been a one-for-16 scrip swap.

Yarraman director Bill Middleton could not be reached for comment and it remained unclear how the wine minnow was financing the takeover.

Yarraman has secured $72 million in senior debt from GE Commercial Finance amid speculation that hedge funds are providing the remaining funds.

Although the deal will effectively be a share-for-share exchange with Evans & Tate, Yarraman has had to convince ANZ that it could pay the debt.

Further complicating matters is that ANZ has a series of charges over Mr Tate’s Grape Expectations Enterprises, his private holding company which owns his Evans & Tate stake. ANZ had originally demanded Yarraman pay cash for much of Mr Tate’s stake, a condition that has since been dropped.

The WA winemaker’s fate now depends on whether Mr Tate, the former executive chairman and strategic driver of the group, tenders his 31.6 per cent stake into the scripbased offer.

Yarraman stunned E&T shareholders when it first launched its audacious bid days before Christmas.

US-registered Yarraman, with only $2.5 million of net assets and a small NSW wine operation, was virtually unknown in the West but pounced at a time when Evans & Tate was engaged in restructuring talks with ANZ.

Yarraman is only listed on the illiquid US over-the-counter market but has pledged to list on the American Exchange or the Nasdaq as well as gain an Australian listing through a CHESS depository interest.

Evans & Tate’s share price has plunged more than 80 per cent in the past two years, but gained 1¢ to 19.5¢ yesterday before the board’s conditional backing.

PETER KLINGER West Australian