ôWe have been working extremely hard to find an alternative to this bid,ö Morschel said in press conference yesterday. ôBut in the absence of a superior proposal, it is in the best interests of shareholders to accept the increased Cemex offer. All Rinker directors intend to accept the higher offer for their own Rinker shares, again assuming no superior proposal arises.ö
Shareholders have until May 18 to vote their shares in favour of the bid which Cemex has stated is its best and final. Several large institutional investors rejected the last bid because it was lower than the range advised in an independent expertÆs report on the value of the business.
The buy-in of asset manager Perpetual will be key to the smooth passage of the deal given its 10.3% shareholding in Rinker and CemexÆs condition of a 90% minimum acceptance rate.
The new offer of $15.85 per share (ex-dividend) equates to A$19.41 per share using last ThursdayÆs mid-point exchange rate published by the Reserve Bank. RinkerÆs ADR holders will receive $79.25 per ADR which is also 22% higher than the original offer. Any Rinker shareholders who may have accepted the initial Cemex offer will be eligible for the increased price.
Both CemexÆs offers have been denominated in US dollars partly because Rinker earns most of its revenues in the US, but a rise in the Australian currency in recent weeks certainly makes the current offer less attractive to Australian investors. Shareholders had been hoping that a new offer from Cemex would top A$20 per share, which may have been the case if it werenÆt for the appreciation in the Australian dollar since October.
The Aussie dollar reached 16-year highs yesterday as traders speculated that Cemex would soon be buying into the currency to fund its bid. This morning the dollar was quoted at 82.55 US cents to one Australian dollar. The stock exchange too reached a new high, with the benchmark S&P/ASX200 closing up 75.9 points to 6,153.
The new offer represents a 40% premium to RinkerÆs ordinary share price since Cemex made its first bid in October last year, and a 50% premium in US dollars. It represents a 5% premium to RinkerÆs closing share price last Thursday, before the Australian stock exchange closed for the Easter break and Rinker was placed in a trading halt.
The new price values the Australian construction materials company at a 10.4 times EV/Ebitda multiple based on Ebitda to December 31, 2006.
Morschel says that, after the October offer from Cemex, the Rinker board worked on strategies to provide shareholders with growth by expanding the business in markets like the US.
ôWe looked at transactions involving other industry participants, private equity and corporate restructuring û with or without partners and with or without the demerger of the Readymix operations in Australia û and including a re-domicile of Rinker in the US,ö says Morschel. ôUnfortunately we were not able to find a substantive growth option that would allow us to build further on that performance. We could not find an alternative that offered a better risk-reward combination for our shareholders than what the higher Cemex bid offers.ö
ôWe have taken into account that if the Cemex offer was withdrawn, there is a risk that the Rinker share price may fall,ö he says.
Morschel thanked the work of the board, saying that over the past four years the companyÆs share price has increased by 295% providing a total shareholder return of 332%.
Analysts say the bid by Cemex, which is already the world's third biggest cement maker, has very little to do with the Australian market. They say the deal is designed to solidify its operations in the US and could provide a 30% increase in sales and pretax profits for Cemex.
Rinker was advised by UBS on the transaction, while Cemex was advised by Citi and JPMorgan.
RinkerÆs shares commence normal trading tomorrow.
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