Delegat's takeover bid for Oyster Bay

An industry commentator thinks Delegat's will probably be successful in its bid for the rest of Oyster Bay despite the offer price being low.

Delegat's Group has launched a takeover bid for the 45% of Oyster Bay Marlborough Vineyards it does not already own.

The Oyster Bay brand is Delegat's flagship export brand with the brand separate to the vineyard operations being bid for.

Delegat's is offering either $1.80 per Oyster Bay share or one Delegat's share for every Oyster Bay share to shareholders residing in either New Zealand or Australia, an offer which values all of Oyster Bay at $16.2 million.

Milford Asset Management's Brian Gaynor says the low offer is an example of what's happening in the wine industry. Bids reached $6 for Oyster Bay's wineyards around five years ago when two competitors were competing for them.

"The drop tends to indicate quite strongly what has happened to the wine industry in the last five years. It's really in disarray at the monent because grape prices are falling, there's a huge amount of debt in the sector.

Gaynor told TVNZ's NZI Business today he thinks there's a "strong chance" Delegat's will be successful despite the price of the bid.

Oyster Bay shares last traded at $1.60 on October 12 while Delegat's shares rose 5 cents to $1.69 in trading yesterday.

Delegat's expects to make its formal offer on November 2.

Oyster Bay's independent directors, chairman Sandy Maier, Ruth Richardson and Mark Peters, say they believe Delegat's offer was in response to a report they commissioned by First NZ Capital on the most efficient and effective capital structure for Oyster Bay.

Oyster Bay's independent directors had presented Delegat's with the key findings of that report, Maier said.

However, the independent directors won't make any recommendation to Oyster Bay shareholders until they issue their target company statement which will also contain details from the First NZ Capital report, he says. Until then, Oyster Bay shareholders are advised to do nothing.

The independent directors have appointed Grant Samuel to prepare a report on Delegat's offer and First NZ Capital is providing them with commercial advice.

The First NZ Capital report was commissioned after Oyster Bay's April market update advising it was likely to report a loss for the year ended June 30 due to low grape prices and it might fail to meet its banking covenants.

It later gained a waiver of those covenants and subsequently reported a $13.8 million net loss which included an $841,000 operational loss and asset write-downs.