Coates becomes latest Australian firm to reject buyout

Coates Hire is the latest listed Australian company to reject a buyout offer because the price was too low. The Carlyle Group had reportedly been a frontrunner in the race for the machinery rental company.

Coates Hire, an Australian listed equipment rental company, has rejected proposed takeover offers from third parties including The Carlyle Group, on the grounds that they have “failed on price”.

Carlyle and National Hire Group, a strategic investor, were offering the equivalent of A$6.25 a share in cash, valuing the company at more than A$1.5 billion ($1.27 billion; €934 million), according to local daily The Australian. Coates Hire was understood to be holding out for at least A$6.50 in cash per share.

Following Coates Hire’s takeover rejection, the company share price fell 7 percent to close at A$5.15 on 29 August, but clawed back some of the losses today to close at A$5.35.

Carlyle and National Hire Group became the frontrunners after Nikko Principal Investments Australia and Pacific Equity Partners withdrew from the race.

Coates Hire said in a filing: “The Board has unanimously determined that the proposals received from interested third parties are not of an appropriate value to justify recommendation by the Board.”

The deadline for bids for Australia’s largest equipment rental group, which followed an unsolicited private equity approach, had been delayed from 14 August to 25 August.

The delay of the proposed sale is understood to be due to a lack of liquidity in the credit markets following the US sub-prime problems. Carlyle and National Hire had planned to borrow A$2.2 billion ($1.9 billion) to fund their bid, three people with direct knowledge of the deal told Bloomberg.

The Coates Hire sale was identified in the wake of the credit market squeeze as one of “three visible processes underway” in Australia, a local banker told PEO in July.

More expensive debt has been blamed for stalling deal-making, according to sources. “Before, fund managers were willing to pay more for acquisitions because debt was so cheap,” one industry participant said. He added that the more conservative lending market was forcing buyout funds to practise greater discipline when making fresh investments.

Carlyle declined to comment.

Coates Hire, meanwhile, said it would turn “its full attention to value-enhancing strategies and the pursuit of a number of strategic initiatives building on the successful restructuring of the business in fiscal 2007.”

Other Australian firms to reject buyout offers this year include airline Qantas, explosives maker Orica, travel agency Flight Centre, media group APN and supermarket chain Coles.