Mercantile OFM’s off-market offer to acquire all of the ordinary shares in Yellow Brick Road will expire today, with acceptances so far totalling less than 1 per cent of YBR’s shares.
In August of this year, the investment company offered Yellow Brick Road shareholders an off-market takeover bid to acquire all of the ordinary shares in the company for 0.09 cents, which YBR’s executive chairman, Mark Bouris, said was “unsolicited”, and in the view of the board of directors of YBR, “materially undervalues the existing and future value of the company and is opportunistic in its nature, timing and pricing”.
The offer, made by Mercantile OFM (a wholly owned subsidiary of Mercantile Investment Company), sought to acquire YBR shares at a cash price that represents a 3.2 per cent discount to $0.094.
YBR’s directors have unanimously rejected the takeover bid, claiming that the offer was “grossly inadequate”, adding that Mercantile’s “inadequate and opportunistic takeover bid would deprive YBR shareholders of the full strategic value of their investment”.
In its second supplementary target statement issued by Yellow Brick Road (YBR) to the ASX on Thursday (18 October), the broking brand revealed that acceptances of Mercantile’s offer were less than 1 per cent of YBR shares in total.
Further, the broker group noted that Mercantile’s offer remains subject to its original conditions, which argued “have not been satisfied or waived, and, in the opinion of the YBR directors, are not likely to be satisfied by the end of the offer period”.
“The directors continue to recommend to YBR shareholders to reject Mercantile’s offer and do nothing,” the statement read.
Earlier this month, Mercantile had issued its own second supplementary bidder’s statement, in which it argued that “many” of YBR’s explanations as to YBR’s value were “confusing”, which YBR has denied.
Further, Mercantile questioned YBR’s proposed securitisation program, arguing that it “believes YBR has raised the possibility of securitisation once again, simply in an attempt to defend itself against Mercantile OFM’s offer”.
YBR “strenuously denied” the allegation, which it said was untrue.
The statement concluded: “Once and if YBR completes negotiations to establish a warehouse facility and securitisation program, then the amount of capital that will need to be raised by YBR will be able to be ascertained and announced to the market.
“As shareholders will be aware, on 12 September 2018, YBR announced to the ASX that it had entered into an exclusive negotiation arrangement with a major Australian bank for it to provide a $300 million residential mortgage-backed securities warehouse facility to YBR.
“As part of this process, the bank has now issued a detailed indicative term sheet to YBR and the required due diligence process has been partially completed and the terms of a warehouse facility agreement are being negotiated.”
The Mercantile offer will expire at 7pm (Sydney time) today (19 October 2018), and the company has said that the offer will not be increased or extended.
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Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.