Freight Rail, Rail Supply, Rolling stock & Rail Vehicle Design

Shareholder chatter as Bradken rejects another bid

Wagons without bogies at the Bradken commissioning site at Kwinana, WA. Photo: Bradken

Rail wagon supplier Bradken will reportedly receive pressure from its shareholders over another failed takeover bid last week.

Bradken’s board on April 2 confirmed that it had received a $2.50 a share bid the day prior, but had turned it down.

“The Board of Bradken considered the proposal and determined that it does not represent fair value and accordingly determined not to engage further,” the company told the ASX.

The $2.50 a share bid is less than half of the original non-binding, indicative proposal from the joint venture of Pacific Equity Partners and Bain Capital Asia, which was said to be $6.00, and was originally bid in August last year.

The $2.50 a share bid is also less than half of the formal bid made by that same consortium in December 2014, which was $5.10 a share.

Bradken told the market that it was not happy with the $5.10 a share bid in January this year, and had rejected it.

“The board notes that the proposal by the consortium has been made at a low point in the mining cycle during a time of significant share price volatility in the broader mining services sector,” Bradken said at the time of the original bid.

Now Pacific Equity Partners has returned with a new takeover partner – Koch Industries – and it should come as little surprise that Bradken so quickly rejected a $2.50 a share bid.

But shareholders are reportedly preparing to pressure Bradken into better engaging its suitors, as fears grow that takeover candidates may grow restless and move for a hostile bid.

A year ago Bradken’s share price sat at around $4.50. It fluctuated throughout the middle of the year, reaching $5.00 in mid-August, before declining to $3.30 just prior to the announcement of the formal $5.10 a share bid in December, at which point it jumped back up to $4.50.

The share price stayed at $4.50 until the initial bid fell through in January, at which point the share price plummeted.

Just prior to the announcement of the recent takeover bid, the company’s share price was below $1.90. Since the announcement, it has risen to roughly $2.30.

Bradken announced a net loss after tax of $92.6m in the first half of 2014/15. It reported $14.5m in EBITDA – down 83% – and did not issue a half-year dividend, following a 15c a share dividend after the first half of last financial year.

“Ongoing volatility in a number of commodity and mineral markets to which Bradken is exposed, continued to persist in the first half,” Bradken said in February.

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