PCH Group. PCH knocked back an offer from a British company Cape...

PCH Group. PCH knocked back an offer from a British company Cape Plc, at $1.30 a share. Cape wanted to do a friendly deal but several weeks later Cape have come back with a hostile offer at the same price. Now we think this is a pretty interesting situation. When Cape was doing due diligence there was a “standstill” caveat put in place, which meant that the Cape couldn’t launch a takeover. It’s ignored this agreement and made its bid public.

Both of these companies are in scaffolding and fencing, which has a lot of leverage to the building and the resources boom. The fact that they’ve been prepared to go hostile puts PCH Group in play. Now it’s my understanding that PCH now knows they’re in play and realises that the best thing they can do in this situation get the highest price for the company and I believe that they’ve implied in presentations that there are other potential buyers looking at the business. What’s interesting about this is that you can buy the stock a few cents below the current bid.

So it’s an interesting situation. You’ve got a hostile cash bid. The board of PCH has to remove Cape from what they call a standstill agreement, which allows them to do due diligence on the company originally. I think the board will do that and I think there’s every chance you could see other bidders emerging. In situations like these where we have seen boards knock back bids, we have seen that share price fall quite dramatically. If the PCH board is smart it knows this and will try and get the best possible price for its shareholders.

RAB