By Claire Reilly

Following an offer from Haier to buy out a controlling stake in Fisher & Paykel Appliances, the New Zealand company has issued a statement to the Australian Securities Exchange advising shareholders not to accept the offer.

In a letter to shareholders, the chairman of Fisher & Paykel Appliances Holdings Limited (FPA), Keith Turner, wrote that the “independent directors of FPA…unanimously recommend that shareholders do not accept the offer from Haier” [emphasis Turner's own].

Turner noted that an independent adviser had valued the company’s shares between $1.28 and $1.57 per share, and that the independent directors of FPA (not including those with a conflict of interest relating to the Chinese company) considered that Haier’s original offer of $1.20 per share “does not adequately reflect their view of the value of FPA based on their confidence in the strategic direction of the company.

“FPA is in a strong financial position and, as the Independent Advisor notes, FPA is at a ‘relatively early stage of implementation of the company’s comprehensive rebuilding strategy’.”

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In its Independent Adviser’s Report, financial services firm Grant Samuel conducted a lengthy review of the history of both FPA and Haier, noting the benefits and drawbacks of shareholders accepting the offer.

At the centre of their valuation, the advisers stated that “the Haier offer of $1.20 per share is below Grant Samuel’s assessed value range for FPA shares”.

The firm outlined that if Haier failed to gain a controlling stake of 50 per cent in FPA, the offer would lapse and Haier would retain its current 20 per cent holding. In this scenario, Haier would not even be able to purchase the 17.46 per cent stake held by major shareholder Allan Gray Australia, as a shareholding in any company of between 20 and 50 per cent is not permitted under the Takeovers Code.

If Haier crosses that 50 per cent threshold, it would then have the power to take “effective control over the day-to-day operations of FPA” including the power to appoint new directors, while a stake of more than 75 per cent would allow it to pass “special resolutions” to change the company’s constitution or approve major transactions. The company would also be permitted to “creep” up its ownership by 5 per cent every year.

If Haier gains a 90 per cent stake in FPA it will have reached the “compulsory acquisition threshold” and it will be able to acquire remaining shares. The company would then be delisted from the New Zealand Securities Exchange, and FPA would become a wholly owned subsidiary of Haier.