The Citadel share price is flat this morning as the company announced its shareholders have approved the all-scrip takeover offer from PEP.
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Citadel Group Ltd (ASX: CGL) announced today that its shareholders have approved the all-scrip offer from private equity group, Pacific Equity Partners, as an alternative to the all-cash $5.70 per share takeover offer. At the time of writing, the Citadel share price is trading flat at $5.67.
About the Citadel takeover
In September, investors scrambled to buy up the Citadel share price after the company announced it had received a takeover approach from Pacific Equity Partners (PEP).
The proposed offer at the time was for an all-cash price of $5.70 per share, a 43% premium on the Citadel share price at that time. The offer valued Citadel’s equity at $448.6 million and enterprise value at $503.1 million. The Citadel share price jumped by 35% on the news that day.
However, the terms of the bid also gave shareholders the option to take a scrip alternative to enable them to retain an indirect interest in the business. In this alternative proposal, they can choose either all-cash, all-scrip or a combination of the two.
Today’s voting results have validated shareholders’ wish for the alternative scrip proposal.
The company’s directors have been supportive of the offer and recommended that shareholders vote in favour of the scheme.
Citadel board chair, Peter Leahy, said this about the takeover offer:
The PEP offer is an attractive transaction which provides an all-cash option for Citadel shareholders. The Citadel board has unanimously concluded that the scheme represents a compelling outcome for our shareholders, customers, suppliers, and staff.
It is worth noting that the cash offer price of $5.70 is a significant discount to where the Citadel share price was trading in November 2018. At that point the company’s shares were trading at over $9. Furthermore, it’s actually lower than the company’s February high of $5.92.
An all-scrip scheme is unusual for a private equity buyout, however under the terms of this scheme, shareholders can elect to take scrip in Pacific Group Topco Limited, a private holding group set up to own Citadel’s shares.
The Citadel directors have today reiterated their recommendation that Citadel shareholders approve the offer, in the absence of a superior proposal, and subject to the independent experts continuing to conclude that the scheme is in the best interest of Citadel shareholders.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.