Lighting Corporation (LCL) formally advised its shareholders on Tuesday to reject the Gerard Lighting Acquisitions' offer after an independent expert found the offer to be ‘neither fair nor reasonable'.
The directors advised shareholders to ‘reject Gerard's inadequate offer' after an independent assessment of the share price valued it be between $1.07 and $1.16 per share.
This represents a 21.6% to 31.8% premium to the 88c a share offer by Gerard, which holds 15.8% of LCL's issued shares.
"The offer does not reflect the anticipated improvement in the market environment for Lighting Corporation's products and fails to recognise the growth to date and prospects for the future," LCL said in a statement to the stock exchange.
Takeover offers of listed companies are typically priced at levels well above prices at which shares normally trade, and the independent expert notes that evidence in Australia is that average premiums paid in successful takeovers generally range between 30% and 35%, LCL said.
However, the offer represents a premium of only 9.9% to Lighting' closing share price on 5 October 2007 of $0.825, the last trading day before Gerard's offer was made, less the fully franked dividend of 2.4 cents.
At current prices, LCL appears cheap relative to the market and trades on an estimate of 10.8×2008 earnings.
Gerard Lighting Acquisitions is a wholly owned subsidiary of Gerard Lighting and has been building a stake in Lighting Corporation for the best part of the year.
LCL's managing director, Dov Mowszowski, and interests control around 25% of the company's shares and other associates are believed to speak for another 10% or so.
If Gerard wants to succeed, it will have to lift the offer share price substantially.
The stock traded between a low of 94c and a high of 95c.
This range gives an indication of where a successful price might lie.
