For a small, troubled wine maker on the verge of going broke, Evans & Tate Wines is proving to be extremely popular.
It has just received what would be its third or fourth takeover/merger proposal, despite being on the bones of its balance sheet and surviving at the whim of its bankers, the ANZ.
The latest offer is from fellow Margaret River area producer, Ferngrove Vineyards Ltd.
It received an odd offer in February from the US listed Yarrman Winery Inc which has interests in the Hunter Valley.
That was flicked in March because Evans & Tate's management wasn't sure if Yarraman, which was smaller than ETW, had any money, let alone enough to do a deal.
There were reports of another offer in May when the ANZ struck a deal on restructuring debt. The ANZ had to find a co-investor but the company interested, didn't proceed.
A third offer came from Perth businessman, Peter Fogarty's Pendulum Capital Pty Ltd which struck a deal with the ANZ, to restructure the winemaker's balance sheet and underwrite a $16.7 million non-renounceable rights issue.
Pendulum is representing an unnamed investor group.
If the proposed deal happens, ANZ will emerge with about 22 per cent of ETWs issued capital in exchange for slashing its debt by $45 million.
But the bank could end up with 40 per cent if it is required to make up a shortfall in the proposed rights issue, which it is underwriting together with Pendulum.
The rights issue will offer existing ETW shareholders the opportunity to buy shares at 5 cents each for every two shares they own.
The beauty of the deal from ETW's point of view was that it would cut debt by $45 million, which is the key to all the deals.
That eases the crippling burden of interest payments and gives the company a chance of surviving.
Under the terms of the Pendulum deal ETW will issue 430 million shares to ANZ and the bank will sell half of those shares to Pendulum's mysterious investor group for an "undisclosed sum".
In the end, considering the rights issue Pendulum could end up with around $19 million invested in ETW.
That's a complicated deal but all restructurings like this are because the name of the game is to raise as much capital as possible from non-creditor investors, so as to pay down bank and other debts. Existing shareholders are severely diluted in the process.
The Ferngrove offer is different in structure and appears simpler.
It revolves around Evans & Tate acquiring all shares in Ferngrove: in effect a backdoor listing.
To effect the proposed merger, ETW will acquire all shares in Ferngrove for the issue of 413,333,333 shares to Ferngrove's shareholders.
That would come after ANZ had converted $45 million in debt it is owed by ETW, in exchange for the issue of about 409 million Evans & Tate shares at 11 cents each.
After a two year escrow period, there would be a managed sell-down of the ANZ shareholding in the merged company.
ANZ would also have to confirm the ongoing post-restructure availability of a $5 million undrawn working capital facility
Immediately after the merger between ETW and Ferngrove, there would be an underwritten, 1-3 rights issue to all shareholders at five cents per share to raise about $17.68 million.
With a $2.32 allowance for over subscriptions ETW is looking to raise $20 million.
Around half the amount raised will be used to further reduce debt; the other $10 million will be used as working capital.
This would hopefully leave around $42 million in debt owed to the ANZ.
The conversion terms for convertible note holders and holders of WinES (income notes)have been improved. Convertible note holders are due to meet this Friday.
Evan & Tate said yesterday it was yet to decide which offer it will recommend.
"The ETW board has not analysed, recommended or accepted the (Ferngrove) proposal at this stage," the company said in a statement to the ASX.
ETW shares ended 1c higher at 15.5c.
