Can the Shareholders of Greencross be Relieved Now?

  • Oct 10, 2018 AEDT
  • Team Kalkine
Can the Shareholders of Greencross be Relieved Now?

The shareholders of Greencross Limited (ASX: GXL) can now take a sigh a relief as a private equity giant, TPG Capital is having the interest in the company. The private equity player has UBS (the global investment bank) for the advice. As per the management of GXL, the company has been dealing with several parties in regard to the proposals concerning the takeover. The lawyers as well as bankers earlier viewed that the private equity players have been sitting on cash. However, they also added that these companies are now looking to deploy their cash piles towards the listed companies. The increase in the dry powder of the private equity companies is negative for them primarily because the market participants assume that these companies have not been making investments. Thus, private equity companies need to make careful investments.

Affinity Equity Partners has entered into a bid for Scottish Pacific and now Greencross has also attracted the attention of the private equity players. Also, KKR & Company showed interest in MYOB. KKR has given the cash proposal for an amount of $3.70 per share. This proposal reflects the premium of 24% to the closing price of MYOB which was $2.98 per share. The chief executive officer or CEO of MYOB named Tim Reed has been running the company from 2008. He stated that they got the proposal from the US private equity player on the weekend. He also stated that they would be keeping the market posted regarding the decisions which they would be making. They are working towards improving the shareholder value and, as a result, they would be keeping in the mind the appropriate proposal. `

TPG Capital has not been considering Greencross for the first time, though. TPG Capital and The Carlyle Group, 2 years ago, has initiated the valuation of the company at $740 million and have raised the bid at $6.75 per share.

The financial position of Greencross has not been very impressive lately. They have been struggling a lot in terms of their bottom line numbers. The company’s profit was not able to impress the market players even though they have big retail stores as well as a strong network. Moreover, the favorable momentum was also witnessed in the company’s top line numbers. Still, the company’s margins have been unable to attract the attention of the market participants.

However, the market participants are now expecting a significant growth in the company’s numbers in FY 2019 primarily because of the recent strategies which have been deployed by the new chief executive officer or CEO. He came up with provisions as well as dashed several items which negatively impacted the bottom line number of FY 2018. In addition to all these, the company might witness a positive impact on the profits because of the favorable momentum in the revenues.

The stock price of Greencross Limited has witnessed the strong momentum today i.e. October 10, 2018. At the time of writing, the stock price stood at A$4.880 reflecting an intraday increase of $0.740 or 17.874%.

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