Cardno board rejects takeover bid from Australia's Crescent

The PE firm last month said it would buy one out of every two shares - excluding the 19.62% it already owns - in Cardno at A$3.15 apiece. Having received a cash payout for half their holdings, shareholders can either sell the rest on the market or hold on to them. Should the offer be fully taken up, Crescent would pay approximately A$215 million ($152.7 million) and hold a 58.91% interest in the company.

The offer represents a 26% premium to the September 11 closing price, the last trading day before Crescent's interest was made public. Since then the stock has jumped to around the A$2.90 mark.

However, the Cardno board cited an independent assessment that put the share value at A$3.74-4.13, according to a regulatory filing. It believes the premium being offered for control is relatively low by Australian standards and that the PE firm is taking advantage of Cardno's share price trading at close to five-year lows due to challenging market conditions and the recent appointment of a new CEO.

The company has since released its own strategic review, which outlines plans to reduce net debt, improve earnings by cutting costs and increasing margins, divesting non-core businesses, and expanding capabilities with select clients in targeted geographies. In particular, it wants to boost exposure to Australia's A$4 billion environmental services market and the A$100 billion US engineering market.

Cardno focuses on developing physical and social infrastructure projects. It has struggled due to reduced demand for oil and gas services in the US, while the commodities downturn in Australia has prompted a wind-down of major project work and delays in infrastructure investment.

Crescent noted in its bid document that Cardno faces numerous challenges, having seen its share price drop from A$7.56 in July 2012, while there has been negative earnings growth of 21% per annum over the three years to June 2015.

Although revenue grew to A$1.43 billion in 2015 from A$1.31 billion the previous year, Cardno swung from a net profit of A$78.1 million to a net loss of A$145.2 million. EBITDA fell from A$141.7 million in 2014 to A$108.4 million in 2015.

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• Topics
• Buyouts
• Industrials
• Infrastructure
• Australasia
• buyout
• Infrastructure
• Australia
• Crescent Capital Partners
• Commodities