Yellow Brick stands still on takeover bid rejection

  • Sep 04, 2018 AEST
  • Team Kalkine
Yellow Brick stands still on takeover bid rejection

Directors of Yellow Brick Road Holdings Limited remain still on their decision to reject the takeover bid offer given by Mercantile OFM Pty Ltd, a wholly-owned subsidiary of Mercantile Investment Company Ltd.

On 20 August 2018, Mercantile OFM Pty Ltd placed an off-market takeover bid to acquire 100% of ordinary shares in Yellow Brick at an offer price of $0.094 in cash. The offer price was reflecting a discount of 3.2%. But on the same date Yellow Brick released their response to take no action in relation to the acquisition bid offered by Ron Brierly's Mercantile Investment Company.

Following their immediate response to the bid, today the company released Directors’ unanimous recommendation on the bid, advising shareholders to ‘reject’ Mercantile’s offer. 

In justification to their recommendation, Directors quote that ‘the offer is grossly inadequate’. The takeover price offered by Mercantile is viewed to harm the full value of YBR as YBR’s share price has always traded higher than the offer price plated by Mercantile.

The recommendation reads that takeover bid would rob of YBR’s shareholders interest of the full strategic value of their investment and therefore they should not accept the takeover offer.

Furthermore, the Directors warned the shareholders that if they accept this offer, they may loose the right to participate in any subsequent better offer, if received.

Subsequent to this update, Yellow Brick’s stock surged by 5% to $0.105 on 4 September 2018 (3:28 PM AEST). The stock has recorded performance change of -25.93% over the past one year.

The Board of Directors have also recommended the shareholders to take no action and ignore all the communication they receive in relation to this bid.

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