An update to the takeover of Coffey by Tetra Tech
The Bidder and Target statements have been released with full details of the takeover offer by Tetra Tech. The full document can be found here, and prior commentary and background details can be viewed here.
Key dates:
- Offer opens: 10 November 2015
- Offer closes: 11 December 2015
Conditions:
- a Minimum Acceptance Condition (90%);
- no Material Adverse Change;
- no Prescribed Occurrences;
- no Restricted Action; and
- Coffey not making any untrue statements to ASX.
Tetra Tech may choose to waive some of these conditions.
The transaction will also be subject to oversight by the Foreign Investment Review Board, however there is not expected to be any issues in this regard.
Minimum Acceptance Condition:
If Tetra Tech achieves the 90% Minimum Acceptance Condition it intends to proceed to compulsorily acquire the remaining Coffey Shares.
Possible outcomes:
Tetra Tech acquires 100% of Coffey (core expectation):
- Coffey would become owned by a much stronger entity and while there will not be an explicit guarantee from the parent to Coffey it would likely provide a level of financial support if required
- It would trigger the Change of Control condition meaning bondholders have the option to sell their notes back to the company at 101% of face value plus accrued interest
- Bondholders can continue to hold their bonds which have a first call date of September 2017 at 103% or September 2018 at 101.5% of par before maturity in September 2019
- We also note that the issuer continues to have the option to at any time purchase the bonds in the open market or by other ways such as by tender to bondholders and at any price
Tetra Tech acquires less than 100% of Coffey
- Tetra Tech has the option to buy any amount offered to them
- The Change of Control condition is triggered at 51% or more ownership meaning bondholders have the option to sell their notes back to the company at 101% of face value plus accrued interest if this is met
- If Coffey becomes partly owned, it is Tetra Tech’s intention for the company to continue to be listed on the ASX. However the ability to remain listed will be subject to ASX rules (including there being a sufficient number and spread of Coffey Shareholders)
- Any large shareholding by Tetra Tech would be credit positive given its financial strength and the view that it would be a supportive shareholder. This would give Coffey a higher likelihood of being able to do an equity raising if needed
Tetra Tech does not meet the 90% Minimum Acceptance Condition and withdraws from the deal