Standard Industries Inc., the U.S. roofing and waterproofing business, defended its 980 million-euro ($1.1 billion) offer for German supplier Braas Monier Building Group SA, rejecting claims made by the target that its bid is too low.
A letter sent by Braas Monier to its shareholders last week “contains a number of misleading statements and outright falsehoods that we feel obligated to correct,” Standard Industries said in a message to those same investors on Monday. The U.S. company sought to counter claims made by the German firm on Sept. 23, which said the bid of 25 euros a share offers no premium and ignores potential cost savings and comparable deals.
Standard Industries dismissed the first of those claims, saying its offer is 15 percent higher than the share price of 21.74 euros on Sept. 13, the day before the bid price was disclosed. Braas Monier, which is based in Luxembourg but trades in Frankfurt, fell 9 cents to 25.85 euros at 4:02 p.m. Monday, valuing the company’s equity at 1.01 billion euros.
The U.S. firm also disputed figures provided in Braas Monier’s letter that claimed the comparative values paid in similar transactions showed the offer is too low. Standard Industries said its bid values Braas Monier at 9 times earnings before interest, taxes, depreciation and amortization, more than the 8.4 times it paid in April for Danish rooftiles maker Icopal A/S. The German firm said last week that Icopal got a price of 10.5 times.
The suitor also hit out at German firm’s argument that the price ignores cost savings from a combination, saying Braas Monier’s analysis of potential synergies of 30 million euros to 40 million euros are “neither reasonable nor achievable.” The takeover plan is driven by investment, rather than job and cost cuts, it said.
The counter letter, seen by Bloomberg News, is the latest escalation between the two roofing companies. The U.S. firm’s co-heads David Millstone and David Winter view the combination as an opportunity to create “a global leader in the roofing and waterproofing business.” The target’s board, led by Chairman Pierre-Marie De Leener, says the offer came without warning and undervalues the company, which listed in June 2014 at a price of 24 euros a share.
Braas Monier may find it difficult to defend against the takeover because Standard Industries acquired a stake of about 29.1 percent via an investment vehicle in June, and has a commitment from owners, including Apollo Global Management LLC, TowerBrook Capital Partners and York Capital Management, to tender their remaining 10.8 percent. Those investors took over the company in 2009 in a debt restructuring.
In Monday’s letter, Standard Industries also highlighted business challenges faced by Braas Monier, citing last month’s reduction in the German company’s forecast of revenue growth for this year to 1 percent from 3 percent previously.
“By combining with Standard Industries, the company will benefit from geographic, product and end-market diversification, and through our increased scale and commitment to investment in the business and its people, will create more opportunities for all stakeholders,” according to Monday’s letter.
In a response to the letter, Braas said it “does not accept” the assertion that its claims from last week were misleading or falsehoods, adding that the board still unanimously recommends that shareholders reject the offer. Management would give “full consideration” to any takeover or merger proposal which offers “fair and appropriate value.”