Why Did Abacus Storage King Reject a $1.47 Per Security Takeover Bid?
Abacus Storage King has turned down a $1.47 per security acquisition proposal from a consortium, arguing the offer undervalues the company and carries significant tax-related risks.
- ASK rejects $1.47 per security non-binding acquisition proposal
- Independent board committee cites $1.73 pro-forma net tangible asset valuation
- Concerns over tax conditions adding timing and completion risks
- ASK declines to provide due diligence materials to consortium
- Securityholders advised to take no action on current proposal
ASK’s Firm Stance Against Consortium Offer
Abacus Storage King (ASX:ASK) has decisively rejected a non-binding indicative proposal from a consortium comprising Ki Corporation Limited and Public Storage. The offer valued ASK securities at A$1.47 each, a figure the company’s independent board committee (IBC) found insufficient when weighed against its own valuation metrics and strategic considerations.
Valuation Discrepancies and Portfolio Premium
The IBC’s rejection hinges largely on valuation grounds. While the consortium’s offer represented a premium over recent trading prices, ASK’s pro-forma net tangible asset (NTA) valuation stands at $1.73 per security, based on an independent review. This figure notably excludes additional portfolio premiums that reflect the scale and strategic value of ASK’s property holdings. The board also factored in potential development profits, brand equity, and corporate cost efficiencies, all of which contribute to a valuation well above the consortium’s headline price.
Tax Conditions Raise Transaction Risks
Beyond valuation, the IBC expressed significant concerns about the tax conditions attached to the consortium’s proposal. The deal requires specific tax rulings from the Australian Taxation Office before completion, introducing uncertainty around timing and the likelihood of the transaction’s successful closure. The board concluded that the offered price does not adequately compensate for these risks, further undermining the proposal’s attractiveness.
Strategic Implications and Next Steps
In light of these factors, ASK has declined to provide the consortium with access to due diligence materials, effectively stalling the current bid. Securityholders have been advised to take no action regarding the proposal. The IBC reaffirmed its commitment to maximizing securityholder value and remains open to considering future proposals or opportunities that better align with this objective.
This episode underscores the challenges in negotiating acquisitions where valuation and regulatory complexities intersect. ASK’s firm stance signals confidence in its intrinsic value and strategic direction, setting a high bar for any prospective suitors.
Bottom Line?
ASK’s rejection sets the stage for a potentially higher-stakes bidding contest or renewed strategic initiatives.
Questions in the middle?
- Will the consortium revise its offer to reflect ASK’s valuation and risk concerns?
- How might ASK’s portfolio development prospects influence future acquisition interest?
- What impact will the tax condition risks have on other potential bidders’ appetite?
