The explanation for the sharp rise in the price of Hills Industries late last week emerged yesterday when the company asked for its shares to be suspended, pending an announcement by tomorrow of a possible acquisition.
The most logical candidate for the deal is small Sydney-based TV services group, BSA, whose board asked for their shares to be suspended 15 minutes or so after the Hills request was revealed by the ASX just after 10 am yesterday.
BSA issued an expanded statement yesterday afternoon which all but gave the game away.
"The directors of BSA Limited (Company) request a trading halt pursuant to ASX Listing Rule 17.1 in order to consider a proposal in relation to the future of the Company, including a potential acquisition and change in ownership structure," the statement said in part.
Hills shares spiked almost 15% late last week to make it one of the top ten performers on the ASX 200 for the month of November.
The shares ended up 14.93% for all of November by Friday's close at $6.39.
BSA shares have risen from just over 50c in the middle of last month to 68c Monday, just before the request for suspension was issued.
Apart from a fairly dull annual meeting in the first two weeks of the month, nothing happened to justify the sharp spike in Hills shares last week. Likewise, BSA's AGM last month updated shareholders on a couple of new acquisitions being bedded down, but that was about all there was.
BSA describes itself as "a domestic satellite and free to air installation company".
It says it operates in the broadcast equipment and services markets in Australia including masts and towers, radio and TV transmission products, microwave transmission products and manufactured antenna products.
That's where the TV and antennas business of Hills operates as part of its Security and Entertainment division, so there is some logic in any move to merge.
A deal involving Hills buying BSA would probably make the combined group the major installer for Foxtel and Austar in Australia. BSA would bring around 50% of Optus work around the country.
And it has just acquired a company called Triple M which is involved in intelligent buildings and other services, especially environmental issues. That would fit with several of Hills existing operations, especially the Hills Eco division.
BSA did lose a big lump of work with Telstra, although it still supplies services valued at around $35 million a year to a Telstra contractor called Silcar.
At 68c a share BSA is capitalised at around $128 million, but that values the company at less than its revenues, which were around $159 million in 2007. It had pre-tax earnings of around $14 million.
The Hills AGM was told at the start of last month that:
"The results for the Antenna & TV Systems business were slightly down on last year due to the reduction in major telecommunications projects.
"The availability of major project work in the current year is difficult to predict but we remain well placed to win those within our wide capability.
"During the period we installed a 7.3 metre Satellite Dish and a 9 metre Antenna to the Department Of Defence for long range communications.
"We were pleased to be awarded the contract to install a Hills MATV System to over 100 rooms at the Ramada Pelican Waters on the Queensland Sunshine Coast.
"There was sustained demand from the Subscription TV industry and we expect this market to remain buoyant as subscribers become aware of the features and benefits of the digital platforms offered by Austar and Foxtel.
"Last month we continued the expansion of our capabilities by purchasing a 50% interest in Opticomm Co a company which has a leading market position in the provision of fibre infrastructure to deliver high speed voice, data and video to homes and multi-residential developments."
Hills has a business called Access TV Services and it works with regional pay TV group, Austar to install its Pay TV services in regional Australia.
These are all satellite based and that's one of the strengths of BSA.
Hills said at the AGM that the Austar sales campaigns during the 2007 year "saw further increased volumes of work for ATS during the year and the business delivered its best result since becoming part of the Group".
