Oyster Bay bid 'light'

Delegat's Wine Estate's $1.80 takeover bid for subsidiary grapegrower Oyster Bay Marlborough Vineyards is too low, two of its bigger shareholders say.

Oyster Bay's two largest shareholders after the parent shareholder said they were unlikely to accept its $1.80 takeover bid.

Both the Cushing family, with 4.19 per cent, and Christchurch real estate agent, David Rankin, with just over 3 per cent, behind Delegat's with 55 per cent, say the offer is too low.

Delegat's is expected to put the formal offer in a week for the Marlborough grapegrower, which accounts for 25 per cent of its supply, to Oyster Bay's 650 shareholders, most of whom are small investors.

Delegat's managing director Jim Delegat said he was waiting for the target company report from Oyster Bay's independent directors, which would make a recommendation for shareholders on the offer.

The second-largest shareholder after the Delegat family is the Cushing family. David Cushing said yesterday, "It seems a tad light to me. We are open minded and have made no decision".

But the $1.80 was at a huge discount to Oyster Bay's net asset backing. In its result for the year to June 2010, Oyster Bay said its asset backing a share was $4.86, down from $6.50 the year before, after a large writedown of assets following a drop in grape prices.

"We are keen to see what Grant Samuel says about that," Mr Cushing said. Oyster Bay has engaged Grant Samuel and Associates to appraise the offer for its shareholders. Despite the drop in vineyard prices, the Cushing family was a long-term investor.

"Obviously, we are looking to independent directors to step up and perform for all shareholders," Mr Rankin said.

"We think Marlborough real estate, for the long haul, is a reasonable investment."

The third-largest shareholder, Mr Rankin, said yesterday the offer was "far too light", and he was unlikely to accept $1.80.

He was allied with former shareholder and Marlborough vineyard owner Peter Yealands, who bid for Oyster Bay five years ago and settled only this June on the outstanding issues with Delegat's by accepting $1.80 a share for his remaining 4.8 per cent stake.

Mr Rankin said Delegat's believed it should offer all shareholders the same price as Peter Yealands received.

"I think they are fulfilling an obligation. They feel that having paid Yealands $1.80, they should provide the same opportunity to everybody else."

He was surprised Yealands had settled at $1.80: "I can't see it being recommended by the independent directors ... It would be unlikely I would consider accepting at the current level."

The annual accounts showed Westpac Bank was owed $17 million and that was below the debt the company had originally for a smaller vineyard. While Oyster Bay's cashflows were not flash in the last 18 months, its ratio of net assets to loan value should not cause any financier concern.

"It's just a temporary cashflow problem. I can't see them getting to 90 per cent so they can compulsorily acquire (the rest)," he said.

Acquiring the assets of Oyster Bay would give Delegat's a lot more borrowing power, he said.

In its notice of intention to make a takeover offer, Delegat's says it will delist Oyster Bay if it secures all the shares.