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Low-ball Calliden takeover in trouble as opposition mounts

Stephen Atkinson, of Adam Smith Investments, has doubts over the Calliden dealInstitutional investor opposition to the sale of insurer Calliden is hardening, with mounting indications the bid by Steadfast may be in trouble, as a shareholder vote on the proposal looms.
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Fund manager Adam Smith Asset Management has gone public with its opposition to the offer, which it deems to be too low. It joined NAOS Asset Management, which earlier expressed the view that the offer on the table for the company “arguably undervalues the company”.

Steadfast is offering 41.5¢ cash a share for insurer Calliden, with shareholders also to receive a 5¢-a-share special dividend.

The offer, via a scheme of arrangement, can be defeated if 25 per cent of the shares vote against it at a shareholder meeting on December 8.

Indicating the poor value of the bid for Calliden shareholders is the fact that Steadfast’s share price has rallied on the bid move, fund managers said.

“We feel Steadfast can  – and should – be paying more this with or without a competing bid,” Adam Smith director Stephen Atkinson said.

“At 46.5¢, the independent expert has ‘low-balled’ the bid.”

The independent expert has assessed the full underlying value of the shares to be in the range of 45.7¢ to 51.1¢, so the 46.5¢ payment per share is at the low end of the range.

However, Calliden has significant franking credits and substantial tax losses that Adam Smith feels have been undervalued. Additionally, the expert valuation has attached a low figure to the worth of Calliden’s insurance underwriting unit as well as undervaluing its insurance broking arm

“We don’t feel Steadfast is paying a very full price for the business,” Adam Smith’s Mr Atkinson said.

Others, such as activist investor Sandon Capital, are also unhappy with the bid price.

“We haven’t made a decision” whether to support the bid, Sandon’s Gabriel Radzyminski said.

“We’ll probably wait until the very end to see if there is a change to the offer.

“It’s a very good price for Steadfast.”

At its December 31 balance date, Calliden had in hand $26 million of franking credits, which will still be sizeable after paying the planned 5¢-a-share special dividend and 1¢ interim payout that will chew an estimated half of this balance.

Since the Steadfast offer was disclosed, Calliden shares have regularly traded 0.5¢ above the imputed value of the offer, although usually with only small volumes traded at the higher price.

This occurred again just over a week ago when a small parcel was traded at 47¢, slightly higher than the theoretical value of 46.5¢.

Under a scheme of arrangement, the proposal could fail if more than 25 per cent of shares vote to oppose the deal. Calliden has a handful of shareholders with large stakes.

Australian Unity holds 13 per cent, with a range of other fund managers such as First Samuel, NAOS, Greencape and Challenger holding  6 to 8 per cent.

This story Administrator ready to work first appeared on Nanjing Night Net.

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