Heiton board to recommend Grafton takeover

The board of Heiton has agreed to recommend a takeover by Grafton that would value the company at €339 million.

News of the recommendation emerged after the market closed yesterday afternoon. The Takeover Panel, which had told Grafton to make its mind up on Heiton by yesterday, had earlier granted a one-week extension on the matter.

The proposed offer is based on Grafton paying €6.606 for each Heiton share - €2.64 in cash and the remainder with 0.58667 Grafton shares. Grafton closed at €6.76 on Thursday evening, the day before the potential offer materialised.

Heiton shareholders who were on the register at July 2nd will also receive Heiton's final dividend of 10.7 cents, thus raising the value of their shares to €6.713.

The Heiton board is giving its "unanimous recommendation" to the proposed offer, which is due to be formally issued over the coming week.

The 2 per cent stake owned by the Heiton board would be worth €6.7 million under the new proposal when the final Heiton dividend is included.

The larger Heiton shareholders, such as Bank of Ireland Asset Management and AIB Investment Managers are believed to have informally approved the deal.

Grafton's 29 per cent shareholding in Heiton also bodes well for a successful takeover. If approved, the new group will have a turnover of at least €2 billion.

The offer document will contain details of the practical effects of an acquisition, such as how Heiton's two main brands - Atlantic Homecare and Heiton Buckley - would be integrated with Grafton's Chadwicks and Woodie's businesses.

The deal will be examined by the Competition Authority.

The latest proposal is the result of "considerable negotiation" between both parties, the Heiton board said.

The directors pointed out that an offer of €6.606 would represent a premium of about 27 per cent over €5.20, Heiton's closing price on June 16th, the day before Grafton revealed it was looking an an offer. This was Heiton's all-time high closing price.

Heiton shareholders will be given the option, under Grafton's proposal, to "mix and match" the share and cash elements of the consideration due to them.

This will be facilitated as long as 60 per cent of the acquisition as a whole is satisfied through Grafton shares and 40 per cent through cash.

Grafton said the terms of the potential offer were final, unless a competitive situation or an alternative third-party offer were to arise.

Heiton had by then dismissed three approaches from Grafton, with €6.35 the highest price discussed at that stage.

This approach, which was also to be satisfied with a mix of cash and shares, was described by Heiton as "a speculative attempt to take advantage of Heiton's future potential".

Heiton's statement at that time referred to the board's view that Grafton could be trying to "frustrate Heiton's ability to grow by acquisition". This was seen as a reference to Heiton's designs on Brooks Group, the merchanting firm that was sold last week to UK firm, Wolseley.

Shares in Grafton closed unchanged at €6.76 yesterday. Heiton shed 30 cents to close at €6.00, but on low volume.