Contrary to news reports at the weekend, The Agency has asserted there is no takeover bid from Magnolia Equities and it’s not clear if there will be, with the group instead receiving a “proposal to make an unsolicited, conditional offer”.
In an announcement to the ASX late yesterday, The Agency explained they received a letter from Magnolia Equities III Pty Limited on December 4, setting out a proposal to purchase all of the company’s fully paid ordinary shares.
Magnolia is associated with ex-director and significant shareholder, Mitchell Atkins, but according to The Agency, the proposal is highly conditional, is below the current value of the group’s share price, and it is unclear whether any purchase would be share or cash based.
“No formal bid for the company has been received,” The Agency stressed.
Meanwhile, The Agency’s board noted there was too little information in the letter for the proposal to be considered credible.
Nor do they consider it a legitimate alternative to the proposed issue of $5 million in convertible notes to Peters Investments Pty Ltd, which will be discussed at the group’s AGM on December 23.
“The proposal includes conflicting and confusing statements including reference to a ‘scrip takeover bid’ and a ‘cash takeover bid’,” The Agency explained.
They also state the identity of the proposal bidder is unclear. Describing it as a “fundamental omission”, they note the letter refers to ‘Magnolia Equities III Pty Limited, or an entity nominated by it’ intending to make a bid.
“If Magnolia is the proposed bidder, the board is sceptical of Magnolia’s ability to raise the cash required in order to fund a takeover bid for 100 per cent of all of the ordinary shares on issue in AU1 (assuming that it is, in fact, a cash offer) and also arrange for a replacement of the company’s Macquarie Bank facility,” The Agency’s ASX statement continued.
“No details of this funding for the proposal have been provided by Magnolia and the status (if any) of discussions with Macquarie Bank, despite a request by the company.
“The proposal states that ‘the Bid and Magnolia’s obligation to make the bid is subject to a range of conditions’.
“It is not clear from the proposal what conditions must be satisfied prior to an offer being made and what conditions any takeover bid will be subject to.”
Finally, The Agency goes on to note the directors would be unable to recommend a takeover bid at the proposed price of 4 cents a share when The Agency’s most recent closing price on December 4 was 5 cents.
“The board would like to reiterate that no formal bid has been received and there is no guarantee a bid will be made,” The Agency stated.
“On this basis shareholders are advised to take no action in relation to the proposal or any document received from Magnolia in relation to the proposal until they receive the Directors’ formal recommendation.”
Confusion over reports of a ‘takeover bid’ saw The Agency request a trading halt on Monday, with trading expected to resume this morning.
Earlier this year the group announced they had turned a corner, with their financial results for 2019/20 indicating a turnaround in cashflow and EBITDA, along with a 48 per cent increase in revenue.
They highlighted 12 months of operational growth and improvement, resulting in revenue of $41.86 million, compared to $28.34 million in 2019.
In October, The Agency further announced they had sold the WA Property Management arm of the company, secured additional funding from Peters Investments Pty Ltd, and extended a reduced debt facility with the Macquarie Bank, subject to shareholder approval at the December AGM.
“While we received and reviewed a range of financing options, following a review of these by the board and its advisors, we believe we have secured a financial outcome that provides the most optimal framework to fund our long-term growth plans,” The Agency Managing Director Paul Niardone said of the funding package announced in October.
“The Agency Group will have greater funding certainty across its business and an improved cash position going forward.”