Donaghys MBO Announced
Donaghys managing director Ross Callon has formed a joint venture with AMP Asset Management to bid for the shares of the listed manufacturing company. On complete acceptance of the offer, the management buy out (MBO) will result in the delisting and privatisation of Donaghys.
"With a recent market capitalisation of less than $40 million, Donaghys is too small to continue to attract institutional investors," said Mr Callon.
"Apart from AMP Asset Management, we have almost no institutional ownership. The institutions have made it clear that they are focusing on the top 40 listed companies, leaving small cap stocks like Donaghys with low share demand."
"Donaghys has always focused on maximising shareholder value. Over the past five years this has been achieved through a tax-free pay out of $30 million and the distribution of shares, and subsequent listing, of Scott Technology at no cost to shareholders."
"In recent years the institutional exit has depressed the share price and reduced Donaghys' options for expansion. Earlier this year we met with AMP Asset Management, our largest and last remaining institution and discussed different options for the future."
"Having evaluated all the options, we believe that private ownership is more appropriate for Donaghys rather than the listed market, and today announced our intention to carry out a management buy out."
A notice was lodged with the New Zealand Stock Exchange after 5pm today, offering to buy Donaghys stock at $1.42 cents per share on the basis that shareholders retain the dividend of three cents announced last week. This means that a current shareholder who accepts the offer will receive $1.45 in total.
"The bid continues Donaghys tradition of providing good returns to investors, allowing shareholders to exit with a 25% premium over the weighted average share price of the last year. It also provides a secure structure for Donaghys in the future."
"Having the involvement of AMP Asset Management, New Zealand's largest funds manager, offers the company sound support and financial backing in its businesses. AMP has considerable experience in backing MBOs. It also guarantees Donaghys future as a respected South Island-based company with operations in New Zealand and Australia."