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Dulux slow off the blocks with bidder's statement

Dulux might have the paint, but apparently not yet the paper, given that its bidder's statement for the $188 million offer for garage door maker Alesco Corp is yet to land.

Dulux chief Patrick Houlihan indicated on Tuesday when launching his $2 a share offer that the paperwork was not far behind, but, as of late yesterday, Alesco was telling Insider it had yet to see it.

That is handy for the institutional shareholders who, on Monday night, sold Dulux enough stock to give it a 19.96 per cent walk-up start ahead of unveiling its offer.

Under the Corporations Act, reportable changes in substantial shareholdings (that is, any move greater than 1 per cent) have to be lodged by 9.30am the following day.

None of the fund managers said to have sold to Dulux - BT Financial, Colonial First State and Perennial - has given any notice of selling down their stakes.

The let-out clause for them is most likely that the act says the 9.30am notices come into being only after the ''bid period'' starts - and that begins when the bidder's statement is lodged.


Still, according to ASX records, the shares were sold at 6.55pm on Monday, or thereabouts, and even under normal conditions any changes in substantial holdings have to be notified within two business days. A harsh regulator might suggest that ought to have occurred last night, especially since the ASX announcements platform is open until 7.30pm, but in any case their notices should be out this morning.

Why does it matter? Well, while everyone knows that Dulux has bought shares, it could be important for other investors to know whether the sellers have retained any significant stakes, because that would be a pointer to their expectations that Dulux, or a rival, will raise the bid beyond $2 a share. Westpac, aka BT, was listed as Alesco's largest shareholder with 8.3 million, and Insider suspects it has hung on to a few. The bank also happens to be Dulux's lead financier on its $270 million loan package to fund the bid.

Investment and lending decisions are, of course, made at arm's length and on commercial terms - but it is always a thorny question in these matters. Did the fact that Westpac stands to make good money from Dulux in establishment fees and interest charges on repayments mean that it, as an Alesco shareholder, was able to secure a benefit that no other Alesco shareholder will get from the bid? And did that influence its subsidiary, BT, in deciding whether to sell to Dulux?

Alesco's chief Peter Boyd now faces not just the prospect of the unemployment queue and the difficulty of keeping staff focused but the timing of Dulux's bid was coincidentally painful for him.

May 1, the day the offer was launched, was also the day that Boyd's latest batch of performance rights was allotted. Based on Dulux's offer price, the 236,310 rights are worth big money.

Problem is that Boyd only gets them if he and the company hit certain benchmarks between now and 2015, and the chances of him being there, or there being a market for Alesco shares, have dwindled.

Meanwhile Goldman Sachs analysts have jiggled their spreadsheet on Dulux and come to the conclusion that it could be a winner for the paint group, but perhaps a little cheap from the perspective of Alesco investors.

The note by Goldman's Jim Godsil and Anthony Longo uses Dulux's own estimates that it thinks there might be $5 million saved by eliminating Alesco's head office after takeover, and a second scenario adding in another $2 million the brokers think Dulux could reap.

With just the $5 million out, they think Dulux's earnings could be 13 per cent better in each of the next two years, implying they are buying Alesco on multiples of only 8.6 to 9.8 times prospective earnings a share. Get another $2 million of savings, and those multiples dip to between eight and nine times.


Irrepressible Perth entrepreneur Farooq Khan and his extended family of like minded investors appear to have restructured their personal interests to avoid another unfortunate misinterpretation of their actions by the Takeovers Panel.

Last year, Khan's sister Ambreen Chaudhri and her husband Azhar, were found by a panel to have created ''unacceptable circumstances'' in relation to their combined share buying and holdings (including Khan's) in investment tiddler Bentley Capital.

The Chaudhris never conceded that the panel was right - largely based on their argument that, while they might be related by marriage, they lead separate economic lives.

So incensed were the Chaudhris with the decision (and some of Insider's coverage) that, last August, Ambreen and Azhar each launched legal proceedings seeking a judicial review of the Takeovers Panel findings and the court-enforceable undertakings they had signed.

Just over a week ago, the Takeovers Panel made a terse statement that the judicial review proceedings had been discontinued by consent after shareholders in Bentley Capital voted at an extraordinary meeting to allow Ambreen Chaudhri's Database Systems to buy the shares at the centre of the dispute.

In the past two days, Khan and the Chaudhris have all produced new substantial shareholding notices, restating their respective interests in Bentley and two other linked companies, Orion Equities and Queste Communications.

At the centre of the changes is a deed of separation of assets of the Chaudhris, with Azhar relinquishing his stake in Database Systems to his wife in exchange for her quitting her interest in Bentley Capital.

Fortunately, their familial relations do not seem to have suffered, because they still have the same home address in Rawalpindi, Pakistan. But they do have it on the record that if their respective investment skills happen to see them both buy shares in the same listed company, it will by accident.