Australian testing services provider ALS Ltd (ALQ.AX) rejected an A$2.67 billion ($1.93 billion) takeover proposal from private equity firms Advent International and Bain Capital, saying its board felt the offer significantly undervalued the company.
Under the proposal, Advent and Bain would provide cash consideration of A$5.30 per ALS share, which represents a 31 percent premium to its pre-offer closing price. ALS, in a statement on Thursday, called the proposal “highly conditional” and “non-binding”.
“The board believes that the timing of the approach is opportunistic and made at a time when ALS is strongly advancing its growth strategy in its life sciences business,” ALS said.
Rejecting the takeover approach was a healthy move from ALS, said analyst Matthew Felsman from App Securities in Sydney.
“ALS has essentially made sure all shareholders receive their upcoming dividend, and effectively opened up the doors for a bidding war,” he said.
ALS has not formally opened a bidding process, which suggests that rival bidders may emerge. Also, dividends were due in four days’ time which would not have been paid had the offer proceeded, he said.
“There is clear value in this area of the market for companies that have been robust enough to make it through challenging operating conditions…companies that dominate their position of the sector and have strong balance sheets with low amounts of debt arguably look attractive on a longer term outlook,” said Felsman.
A spokesman for Advent International said the company was “surprised and disappointed” that the proposal was not accepted. He declined to comment on whether the companies would consider another offer.
ALS offers analytics in energy, life sciences, minerals and industrial assets and processes, and operates across 55 countries.
For the year ended on March 31, 2016, it posted a loss of A$240.7 million mainly due to impairment charges of A$314 million against the company’s oil and gas investments.
ALS shares jumped by 27.2 percent to close at A$5.15 on Thursday.