TORONTO (Reuters) – Cossette Inc (KOS.TO), Canada’s largest home-grown advertising company, urged shareholders on Wednesday not to tender shares to a takeover bid from Canada’s Cosmos Capital that matches a rival offer from U.S. private equity group Mill Road Capital.
Earlier this month, Mill Road reached an agreement with Cossette to acquire the company for C$7.87 a share, trumping Cosmos’s earlier bid of C$5.25 a share. Last week, Cosmos said it would match Mill Road’s C$131.5 million ($125.3 million) offer. [ID:nN18504712]
However, Cossette said its current agreement with Mill Road is not subject to due diligence, while Cosmos’s sweetened bid is subject to a due diligence process.
Cossette said as the amended Cosmos offer does not provide greater value to shareholders than the Mill Road offer, its board cannot determine that the offer constitutes a superior proposal. [ID:nN20245695]
Hence, if it permits Cosmos to complete a due diligence process, this would constitute a breach of agreement with Mill Road and entitle Mill Road to a C$3.25 million break-up fee.
However, Cosmos has also said it may consider raising its bid to C$8.10 a share. Cossette said it is still in talks with Cosmos about this possibility.
Shares of Cossette were flat at C$8.02 on Wednesday morning on the Toronto Stock Exchange. The shares are trading above Mill Road’s proposed offer, indicating that shareholders expect a sweetened offer to materialize.
($1=$1.05 Canadian) (Reporting by Euan Rocha; editing by Peter Galloway)