Bain's Bid and Bapcor's share saga

Company News

by Glenn Dyer

Interesting how the Bapcor (ASX:BAP) share didn’t get near the $5.40 trailed by Bain and Co in one of those airy-fairy non-binding indicative, perhaps-we-might-make-a-bid deals on Tuesday, revealed after the long weekend.

Bapcor shares rose nearly 14% to end at $4.97 after touching a day’s high of $5.01.

The Bain proposal is too vague to be taken seriously at the moment, and the key condition in a deal full of them will be due diligence because, from what Bapcor has said in the recent past, its various businesses seem to be in a mess with losses and write-downs in the offing.

Bapcor shares were down 19% year-to-last-Friday after losing two CEOs since January and revealing a series of problems that look very hard to resolve without big losses and blood on the floor.

Sales and margins are weak, and there is nothing in the offing that suggests any quick improvement.

The lack of any real bounce in the shares on Tuesday suggests investors are suspicious of the Bain approach and perhaps want to see if an auction develops.

The main opposition, Super Retail (with its SuperCheap Auto chain), would have competition problems if it looked at a counteroffer for Bapcor, and besides, it has unresolved issues with allegations about management relationships and other behaviors.

The mooted offer price of $5.40 is a large discount to the $6 plus level the shares were trading at in late April before Bapcor announced that it had lost its about-to-be CEO, Paul Dumbrell, halted trading, and then revealed in a statement on May 2 a host of operating problems including falling earnings.

Bapcor also warned of possible write-downs to be announced with the June 30 results in August.

That warning suggests the need for some swingeing cuts to parts of the company, especially in the AutoBarn retail chain (Bapcor says its trade parts supply business is doing well).

Nothing will now happen until the results are pushed out in mid-August so that Bain has something current to work with and to ask for due diligence.

In a statement to the ASX on Tuesday, Bapcor said the offer was made Friday after the market closed for the week ahead of the long weekend.

Bapcor said the "unsolicited, indicative, conditional, and non-binding proposal from Bain Capital Private Equity, LP was to acquire 100% of the shares in the Company (on a fully diluted basis) by way of a scheme of arrangement.

"Under the terms of the Indicative Proposal, Bapcor shareholders would receive $5.40 cash per share (adjusted for any dividends paid or declared after the date of the Indicative Proposal).

The non-binding offer from Bain is subject to all the usual conditions in offers of this time - for that reason, it can't be taken seriously until considered by the company and gets all the approvals.

Bapcor said it was "disclosing receipt of the Indicative Proposal in advance of the Board concluding its assessment of the Indicative Proposal. The Indicative Proposal is also expressed to be subject to a number of conditions including satisfactory completion of due diligence, execution of a binding scheme implementation agreement, unanimous recommendation from the Bapcor Board of Directors, and commitment from all directors to vote in favor of the transaction (in the absence of a superior proposal and subject to an independent expert concluding that the transaction is in the best interests of Bapcor shareholders), approval of Bain Capital’s Investment Committee, and receipt of all regulatory and statutory approvals (which will include approval of the Foreign Investment Review Board, alongside any other regulatory approvals that are determined to be required).

"The Board cautions that at this time there is no guarantee that the Indicative Proposal put forward by Bain Capital will result in a binding offer or that any transaction will eventuate.”

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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