German tile maker Braas Monierscored a victory late on Sunday by convincing US suitor Standard Industries to sweeten its takeover bid and withdraw any legal action against it.
Source Financial Times
The two companies were at loggerheads in a Luxembourg court last week over whether Braas could split its shares during the offer period — a move that cost Braas nothing but which effectively raised the economic value of Standard’s €25-a-share offer price by more than 10 per cent.
A court decision on the €2bn enterprise value deal was expected by December 21, but the uncertainty of how the court would rule forced the companies to speak to each other and settle the dispute out of court, two people briefed on the talks said.
A joint press release on Sunday said Standard had agreed to terms that value the company at €28.50 a share, a 31 per cent premium to Braas Monier’s unaffected price on September 13. Braas’s board, for the first time, now supports the deal.
The dispute goes back to September when Braas’s board rejected the €25-per-share offer as too low. Standard, which already had rights to own 40 per cent of the stock, took the offer straight to shareholders in a tender offer ending on January 12.
Braas responded on November 29 by saying it would issue one new share for every 10 outstanding — an unprecedented move for a German company — effectively creating money out of thin air. In most European countries such a manoeuvre would not be allowed, but Luxembourg — where Braas is headquartered — permits companies to issue new shares without a shareholder meeting.
In addition, Braas said it would pay investors an interim dividend, raising the price even further, to €28.13 per currently held share.
Braas argued that neither move violated the binding terms in the takeover agreement, but it meant that Standard was going to be forced to a pay a premium it had not agreed to.
Standard, however, argued that unilaterally increasing the cost of the deal was not permissible under the EU’s takeover directive — a framework adopted in 2004 to establish common principles and requirements for EU member states. It then convinced the court in Luxembourg to issue an injunction against Braas, prohibiting the German company from issuing new shares.
Braas objected and the two companies went to court last week.
Sunday’s resolution allows for Braas to issue 3.9m new shares, as proposed, as well as issue a dividend worth €0.64 per currently held share. Standard also agreed to increase its offer on the original shares from €25 to €25.27.
Two people briefed on the discussions called the settlement a win-win.
Braas is able to “enhance value” for shareholders and avoid a legal outcome that could have prohibited the share issuance, while Standard now has the full support of Braas’s board for the integration. Both companies have signed a business combination agreement.
The offer period for the tender offer has also been extended until January 25.
Source Financial Times