Allco steps up pursuit of paint company

Listed Australian private equity firm Allco Equity Partners has made a AU$275 million (€170 million; $201 million) offer to take paint maker Wattyl private.

Allco has made an offer of $3.25 per share, representing a 30 percent premium to Wattyl’s average share price for the one month period up to December 5, the day the private equity firm first approached the company. At that point, Allco made an informal offer that was rejected by the Wattyl board on 19 December.

David Coe, chairman of Allco, said in the offer statement that the bid represented “a very attractive multiple of earnings which is significantly higher than the average earnings multiples paid in acquisitions in the last five years for companies which operate within the Australian building products sector”.

Coe added that Wattyl’s current earnings are “by its own admission, unsatisfactory”, despite having been in a restructuring phase for several years.

Wattyl reported a net profit of AU10.8 million for the year to 30 June 2005, compared with AU18.4 million in 2003/2004.

Wattyl said in a statement that it would consider the offer but urged shareholders to take no immediate action: “In relation to today’s announcement by Allco, the board of Wattyl will meet as soon as possible to consider the offer and will provide further advice to shareholders shortly. In the meantime, shareholders are strongly advised to take no action and not to sell their shares.”

New South Wales-based Wattyl produces paints, varnishes, lacquers and special purpose protective coatings for consumers, contract painters and industrial clients. Established in 1915, the company listed on the Australian Stock Exchange in 1959.

Allco’s managing director Peter Yates said in an interview last month that the Sydney-based private equity firm has more than AU750 million to invest over the next year.

In June of this year, Allco became the largest shareholder in credit reporting group Baycorp Advantage with a 17 percent stake, following a failed hostile takeover bid. The firm is focused on investments in the financial services, media, gaming and healthcare sectors in Australia and New Zealand.