EQT Partners AB, the buyout firm partly owned by Sweden's Wallenberg family, agreed to buy Securitas Direct AB for 10.1 billion kronor ($1.59 billion) after raising the bid to overcome shareholders' opposition.
Securitas Direct said today it recommends the 27.5 kronor- a-share offer to its shareholders. The improved bid is 32 percent higher than Securitas Direct's closing price on Nov. 12, the last trading day before the first offer announcement. Saeki AB, Melker Schoerling AB, and Investment AB Latour (LATOB), which were part of the original bid, will pull out of the transaction.
Securitas Direct management and shareholders including Pennant Capital Management LLC rejected the first offer as too low and said it conflicts with company strategy. Pennant, a hedge fund based in Chatham, New Jersey, said today the new offer still fails to reflect Securitas Direct's value, and that it would maintain its resistance to the takeover bid.
``We continue to view the prospects of the business positively, but we do see some challenges ahead that we are prepared to tackle, as the sole owner, together with the company management,'' Harry Klagsbrun, a senior partner at EQT, said in a statement published today.
Securitas Direct gained 0.6 percent, or 2.4 percent, to 26 kronor. The stock has gained 21 percent in a year. Securitas Direct was spun off from Securitas AB, the world's largest security company, in 2006.
A takeover is subject to backing from 90 percent of Securitas Direct shareholders. EQT is ``hopeful'' to reach that threshold and would abandon the deal should it get less, Klagsbrun said at a meeting with journalists in Stockholm today. EQT's bidding partners said they will sell their shares and use the proceeds for other investment opportunities.
Klagsbrun said he's confident Securitas Direct shareholders including Pennant will ``seriously consider'' selling their shares given the raised bid. The fact that EQT's partners in the original offer will sell should also lend some support, he said.
``We believe the company is worth well north of 40 kronor and plan to vote against the transaction,'' Alan Fournier, a managing member at Pennant, said in an e-mailed response to questions today. ``We are surprised that the insiders have decided to sell their position at this price but understand that they have investment liquidity considerations.''
Pennant, which owned 6.5 percent of Securitas Direct in November, has ``significantly increased'' its stake in the company, Fournier said today, declining to comment on how big Pennant's stake is now. Pennant in November joined other shareholders including U.S. hedge fund Royal Capital Management in expressing skepticism over the initial takeover offer.
``Valuations of companies around the world are significantly lower now,'' Ulrik Svensson, chief executive officer of Melker Schoerling AB, said at the Stockholm meeting. ``We have looked at our total portfolio and concluded that we have alternative investment opportunities.''
Securitas Direct is being advised by JPMorgan Chase & Co. and SEB Enskilda.
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