Charlies Group Ltd: Asahi make takeover offer

What was looking likely all along has happened to Charlies Group Ltd [CHA.NZX] this morning. An offer has been made for full control of the company by 
Asahi Beverages New Zealand Limited, whose parent company is Asahi Group Ltd [2502:JP], the Japanese brewing and drinks giant.

The offer made this morning is 44c which is 16c or 57% higher than its trading close of 28c last Friday. Directors have given their full support for the takeover and it is likely that shareholders will accept given the significant premium over the market price.

Asahi have obviously seen the positive progress of the company over the last year or so and the distribution channels (1, 2) that they have opened up in Australia recently would compliment their Schweppes Australia softdrink business and also open up further shelf space for Charlies products.



Investors only have to ask themselves if they think current management would be able to add the same value that Asahi will do for the Charlies brand and how long they would take to do that and therefore propel the share price to the level of thew Asahi offer.

Depending on your long-term outlook for the company, the offer looks like a good one for the short to medium term shareholder and will be a good cash boost for the founders of the company Marc Ellis and Stephan Lepionka.


Charlies was a pick at 17.5c in Share Investors 2011 Stock Picks.


Takeover Documents

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c Share Investor 2011

Tourism Holdings Takeover: Dont Sell (UPDATE 2)

UPDATE 2: THL shares finished today's trading up 10c to 70c or nearly 17%. This is 2c more than the offer from Ballylinch LP.

Ballylinch LP this morning announced that it intends to make a partial takeover offer to acquire 40.85% of the ordinary shares and redeemable shares in Tourism Holdings Ltd [THL.NZX]that it does not already own. The company currently owns 19.14% of the ordinary shares in THL.

The offer is for 67.5c per ordinary share and this is a 12.5% premium to the closing price on the NZX yesterday.

While the offer is higher than the market price (see one year chart below) and the company has been trading at these low levels because of its poor management and dire results over a number of years, it is opportunistic (and canny of course) of Ballylinch to make an offer for this company when its fortunes are at its lowest ebb in many a year and they are likely after the lions share of THL so they can realise assets that are worth more than the THL share price.

Tourism has been a fickle beast over the last few years and in combo with poor management the share price has obviously suffered. The thing is regardless of its management ills the company is going to see better times in terms of tourist numbers to their businesses and this will eventually reflect in a higher share price as the overall macro situation will get better for them. The 2011 Rugby World Cup should be a boon for THL.

On this basis alone shareholders should soundly reject Ballylinch's offer and hold tight for either a better offer or better times for the company.


Tourism Holdings @ Share Investor

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c Share Investor 2011

Fletcher Building: Crane Takeover Offer Well Timed

The takeover offer by Fletcher Building Ltd [FBU.NZX] for Crane Group Ltd [CRG.ASX] comes at an opportune time for Fletcher. Crane Group is at or near the bottom of a business cycle over the last 6 years (see 6 year summary from the CRG 2010 Annual Report below) and the share price has been trading at a multi year low so Fletcher has made a bid that would have otherwise been higher near the top of the business cycle.


Click on picture to enlarge view

Crane has had a patchy last 10 years with profit ranging from a AU$15 million loss in 2004 at its lowest and a $AU60 million profit in 2008 at the high end. Revenue has ranged from $1.4 billion in 2000 to $2.3 billion in 2008.

2010 half year profit of $21 million was up 16.8% on 2009 and a research report from Aspect Huntly indicates positive earnings with "upside to come" from the commercial building sector - the major floods in Australia over the last month will be a big benefit to Crane and to Fletcher Building so this upside is likely to be significant.

This is where FBU have a problem because CRG management have indicated that the offer for Crane is far too low and significantly undervalues the company and its long term prospects.

Fletcher do not have a good history with acquisitions providing good value for shareholders, with the purchase of Formica Corp a few years ago, for almost a billion dollars, destroying shareholder value and adding less than nothing to the balance sheet. If the offer for Crane is successful it could provide some benefit to FBU shareholders if they can take over the company at its current price.

The AU$ 740 million bid for 90% of the company is detailed as follows and can be found in more detail here.

• Australasian building materials manufacturing and distribution company Fletcher Building (FB) has bid for CRG offering $3.43 cash and 1 FB share implying a value of $9.35, a 28% premium to CRG’s one month volume weighted average price equating to an FY11 PE multiple of 19 based on consensus forecasts and an EV/EBIT multiple of 11.8.


• FB already owns 14.9% of CRG, 13.1% of which it bought from institutional shareholders for $9.35 cash immediately prior to announcement of the bid.


• The bid includes a 90% minimum acceptance condition.

For FBU shareholders like myself this is a nervous time. If the proposed acquisition doesn't come off there will be millions of dollars of cost associated with the takeover activity.

Analysts have indicated that as Crane has over 80% of institutional investors on its shareholder registry so a takeover is likely to be an easier case to make than with a company with more mum and dad investors as shareholders.

We can only cross our fingers that FBU are able to grab Crane at their current bid price and add value to both companies if successful.


Fletcher Building @ Share Investor

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c Share Investor 2011

Bitter - Sweet Chocolate Business

The scramble for a king-size block of Cadbury PLC [CBRY.LSE] by Kraft Foods Inc [KFT.NYSE] fascinates me. I love business and investing but I have to confess also to be somewhat of a chocoholic - doctor it has been 3 minutes since my last bite. In a protracted bid that has been going since a formal offer by Kraft was made in November 2009 after it telegraphed interest in the Dairy Milk maker in September the takeover process has been full of harsh words, threats, finger pointing and egos from all sides of the chocolate vat.

Since then Kraft has been rebuffed twice by Cadbury and those harsh words have been flowing like Cadbury Creme eggs between the CEO'S of Kraft and its sweet milky target Cadbury. Meanwhile Kraft's biggest shareholder, Warren Buffett, has issued a press release urging Kraft not to pay too much for the company.



In this sickly mix of nuts and fruits comes interest from just about every major chocolate company in the world. Ferrero Rocher, Nestle', and Hershey have all been on the radar but all seem to have been dismissed as having short pockets or not serious, save for Hershey which seems to be mulling over a formal bid of its own according to some sources.

The problem for Kraft is that Cadbury contend that its shares are worth more than what they are offering and Kraft's bid significantly undervalues the long-term prospects of the company and they will have to increase their bid before the January 19 deadline if they want to take a chip off the Cadbury block.

I have to agree with Cadbury. The company has a strong presense in most parts of the world and its brand and products - no matter what some might think of its sweet milky almost chocolate free taste - dominate the minds of consumers and their sweet ways when they make a decision to buy a quick convenient snack.

This brand awareness has made Cadbury one of the worlds most successful chocolate makers in the past and that is unlikely to change any time soon.

For these reasons alone Kraft need to raise their offer and any other company considering a move on Cadbury must also take into account the company and its fine pedigree.

Warren Buffett, as a 10% holder of Kraft stock, was against Kraft's bid principally because of its intention to issue new shares in Kraft to help pay for the purchase. I have just been reading Warren Buffett on Business: Principles from the Sage of Omaha, a collection of Warren Buffett's letters to Berkshire Hathaway shareholders and he makes it very clear in a number of his letters that he is against the dilutionary effects of such transactions for the predator company if it doesn't present value for the predator. Of course the price paid for the company is a key factor as well and if the price is right for the takeover then the preferred option of purchase for Buffett is cash and preferably non -borrowed cash at that.

Cadbury would be a great company to own. Good cash flows, strong brands with a competitive moat and profit to boot.

Any suitor will have to pay a premium to take control of the purple one and Buffett has stressed he doesn't want Kraft to be that suitor but if he wants a piece of it - and I think he does - then Kraft and any other buyers are going to have to sweeten the deal beyond the current valuations put on Cadbury's assets.

I cant wait for the next move!

Cadbury @ Share Investor

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c Share Investor 2010

Auckland International Airport lands Australian Ports

As the horse from Ren & Stimpy was fond of saying, "No Sir, I don't like it, I don't like it at all."


Picture Right - Cairns Airport

As first glance and without going into detail that is my first take on the purchase by Auckland International Airport [AIA.NZ] of a nearly 25% stake in North Queensland Airports (NQA) who own the Mackay and Cairns Airports in North Queensland.

If you look even closer it appears to be even uglier.

It cost AIA shareholders more than NZ$166 million (plus finance costs) for a quarter share in slightly less than 5 million annual passenger movements VS Auckland's 12 million plus in two regional airports that have intense competition with Queensland Airports Ltd who operate 3 regional airports in North Queensland with the regional hub of Townsville Airport, Gold Coast and Mt Isa.

Ask Infratil Ltd [IFT.NZ] how their stakes in various regional airports have gone over the years and they will tell you it hasn't done their shareholders pockets any good.

Look, I am willing to admit I am wrong if this turns out to be the deal of the century and AIA management turn the two Australian Airports into shopping malls as they have done with Auckland (oh even more debt) and get more people and tenants there, but the history of regional airports around the world is that they are big money wasters unless they can become regional hubs, and even then it is a stretch. Auckland Airport management are relying on budget carriers to fill the gap left by major airlines flying off to bigger hubs to boost the flagging fortunes of the two airports they have just purchased but this cross your fingers sort of stuff has failed to work for similar airports the world over - see the Infratil example for more.

It would have been better to buy a smaller stake in a larger airport like Sydney, Melbourne or Brisbane - key players in their states.

Auckland Airport is a company treading financial waters at present with management willing to pile on even more debt based on the security vast undeveloped tracts of land it owns around it Airport.

It needs to focus on producing better numbers at its Auckland port and reduce debt before trying to big note in Australia.

Many an NZ company has learned before, Australia is a far more competitive market and the near monopoly AIA company need to remember that when spending shareholders moola.

AIA board members do not have the experience of a competitive Airport market and I personally think they are out of their depth because of this.


Disclosure: I own AIA shares




Auckland International Airport @ Share Investor

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c Share Investor 2010

Coke is it

People love it, it is ones of the worlds most enduring and loved brands. Warren Buffett loves it and has a massive shareholding in the American icon.

In this day and age of dwindling fortunes and sagging sales this brand is a stalwart and Lion Nathan [LNN.NZX], the Australasian brewer, wants a piece of the Australian company that makes the black sticky concoction in this part of the world, Coca-Cola Amatil [CCL.ASX]

Lion Nathan previously owned the loss-making Pepsi franchise in Australasia so clearly see a non-alcoholic soda drinks company as integral to its alcohol brands.

Buffett calls companies like Coca-Cola Amatil "economic moats". That is, a company that has a strong brand and a product that is unique, enduring, easy to understand and sells, even during hard times.

Lion Nathan execs must have been reading some of Warrens screeds of pronouncements on his investing principles because they have their target right. The only problem being they haven't offered CCL Amital stockholders enough for their sweet black goldmine.

Lion have offered only AU$ 7.7 billion for Coca-Cola Amatil . The cash and stock bid, made at a 25 per cent premium to cokes share price, has been roundly criticised by CCA management as "unattractive" and "complicated". The offer from Lion gives Coke shareholders stock in Lion Nathan which is majority controlled by Kirin, the Japanese brewer.

The parent company and approx 30% shareholder in CCA will not comment on the matter but its CFO said last month to analysts:

"if the purchaser had the financial and the management resources to really grow that market for the long term, and that when selling we would sell if at fair value."

The stock and cash offer, even at a 25% premium is still below "fair value" and its is unclear as to whether Lion's management would grow the Coke brand and its other products long-term but of course the answer to that would be why wouldn't they?

The CCL Amital parent company, The Coca-Cola Company [NYSE: KO], wouldn't necessarily go for a higher price for their 30% shareholding but a company that would provide a higher return for their providing the syrup for finished product, which they get whoever owns CCL Amital.

Coke is a strong brand with a massive market share in this part of the world and that and its other strong brands; Fanta, Sprite, Lift, Lift Plus, Powerade, L&P and Schweppes make Lions initial bid too low by far.

Hang on CCL stockholders, don't sell yet.

Related Links

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CCA Shareholder centre

Complete 2007 annual report PDF format (802kb) Complete 2007 Shareholder Review PDF format (2.6mb) Notice of Meeting PDF format (235kb) From Amazon For God, Country, and Coca-Cola: The Definitive History of the Great American Soft Drink and the Company That Makes It by Mark Pendergrast Buy new: $15.61 / Used from: $5.73 Usually ships in 24 hours The Real Thing: Truth and Power at the Coca-Cola Company by Constance L. Hays Buy new: $10.85 / Used from: $4.60 Usually ships in 24 hours Petretti's Coca-Cola Collectibles Price Guide by Allan Petretti Buy new: $31.65 / Used from: $9.00 Usually ships in 24 hours Coca-Cola: The Collector's Guide to New and Vintage Coca-Cola Memorabilia by Randy Schaeffer Buy used from: $4.85 Other Coca Cola books from Amazon c Share Investor 2008