An initial thumbs down from investors to the move by Hills Industries to reshuffle its TV and antenna assets into listed competitor, BSA, in exchange for a controlling stake.
Hills shares fell 37c to a day's low of $6.02 from the $6.39 the shares traded at last Friday at the end of a near 15% rally in two days. But they recovered much of the loss to end down 7c at $6.32 as investors reassessed the deal.
Hills shares and those of BSA were suspended at the companies' request on Monday and yesterday Hills returned to trading after releasing a statement, but BSA remained suspended while it considers the offer.
It is a complicated deal. If agreed to by BSA, Hills would merge its Antenna & TV Systems Group with BSA in exchange for shares.
The proposal contemplates that as a result of BSA undergoing a capital reduction and Hills subscribing for additional shares Hills would end up owning 50.1% of the equity in BSA at the end of the transaction.
A number of approvals will be required from the shareholders of BSA to conclude the transaction. All elements of the proposed transaction will need to be approved for any part to proceed.
BSA has until Friday to agree to the suggested deal.
The joint statement said that if the proposed transaction proceeds, BSA will have revenues of around $375 million a year, with Hills bringing product opportunities in markets that have growth, in particular Fibre to the Home infrastructure, satellite delivery of Voice, Data and Telephony and a presence in the Audio Visual retail market.
"The board is considering the proposal from Hills and will respond at the earliest possible time, at which stage discussions will beheld with ASX in relation to releasing the company from the trading halt," BSA secretary Graham Seppelt said.
Hills makes antennas and dishes: is a major contractor to Foxtel and Austar, the expanding pay TV businesses; BSA is an installer. BSA lost a lot of its Telstra work recently but has picked up some by providing services to one of the winning tenderers.
Hills is believed to have helped out BSA a couple of years ago after a move into Britain soured by scheduling payments and other things to help BSA over a cash crunch.
Hills has a couple of similar arrangements, most notably 46.4% of Korvest's Australian and NZ operations. It operates in the metal and galvanising business and is based in Adelaide, like Hills.
Korvest has a market cap of around $49 million and the shares fell 20 cents yesterday to $5.65 after the Hills announcement re BSA was made public.
BSA is valued at around $128 million, so it will be a much larger deal for Hills.
