Shareholders in Forge Group Ltd, a Perth-based construction and engineering group, have approved the placement of shares to fellow Perth engineer and contractor, Clough Ltd, despite a last minute attempt by a third party to stymie the deal.
Meeting in Perth yesterday, Forge shareholders approved the issue of 10.25 million shares at cost of $19.5 million to Clough.
That’s equal to 13% of Forge, which Clough plans to build on to establish a dominant stake through a proportional takeover offer.
"The Placement specifically meets Forge’s objectives of strengthening its balance sheet and improving working capital to pursue larger scale projects and acquisition opportunities," Forge said in a statement to the ASX
The placement is the first step in a series of transactions, including a proposed proportional takeover offer by Clough, which contemplates Clough becoming a 31% – 56.5% cornerstone investor in Forge and the formation of a long term alliance between the two companies.
"The key alliance principles under the strategic alliance become effective on certain triggers, including Clough acquiring 31% of Forge or if Clough declares the Offer to be unconditional.
"The strategic alliance will allow both companies to leverage their complementary expertise and to capitalise on significant time and place opportunities in the oil and gas, minerals and civil infrastructure sectors.
"The alliance is expected to accelerate opportunities, individually and in partnership, and targets increases in project revenues for both companies with an anticipated positive impact on earnings."
Settlement of the placement is expected to occur by today and documentation relating to the proposed takeover offer will be distributed to Forge shareholders shortly thereafter.
Forge revealed on April 1 that it had received a confidential proposal from a third party "in relation to a change in control transaction with Forge".
"The proposal competes with the transaction with Clough announced 23 February 2010. The proposal which has been approved by the Board of the proposed bidder is non binding and subject to conditions which includes allowing the third party to complete due diligence by 28 April 2010 and postponing yesterday’s shareholders’ meeting to approve the placement to Clough until after 29 April 2010.
"The proposal, if it were to proceed on satisfaction of the conditions is for an off-market takeover bid for 100% of the issued shares of Forge at a price below current market price, but in excess of the price offered by Clough and at a level representing a premium to the price at which Forge shares were trading prior to the announcement of the Clough offer.
"It is subject to a 90% minimum acceptance condition and involves cash and scrip consideration."
All that Forge would say to identify the third party was that "the proposed bidder is a listed S&P/ASX 100 Company".
Forge directors said they would talk to this unknown group about the proposal but told shareholders before the meeting that the company did "not wish to jeopardise the transaction with Clough which underpins a strategic alliance for future growth, is binding, and can successfully complete upon Clough acquiring a minimum of 31% in the Company.
"This must be contrasted with the competing proposal which in its current form is incomplete, non-binding and subject to conditions.
"Given it is a condition precedent of the competing proposal to postpone the shareholders meeting to approve the placement until after 29 April 2010, the Chair proposes to give Forge shareholders the opportunity to adjourn the meeting scheduled to be held today (yesterday) at 11 am to 11 am on 30th April 2010 should they wish to do so.
"The directors unanimously approved the proposal to seek the approval of Forge shareholders to the placement and unanimously recommended that shareholders vote in favour of the resolution in the absence of a superior proposal.
"The directors also stated that they will vote in favour of the resolution in the absence of a superior proposal."
It will now be up to this unidentified group to reveal its hand with a full takeover offer, or disappear.
Forge shares ended up 1c yesterday at $2.96. They bounced as high as $3.10 when traders saw a contested bid situation emerging.
But that wasn’t to be and the shares fell to a day’s low of $2.93 before a small recovery in late trading.
Clough shares were steady at 90c.
