Danks' high share price adds a new twist to Woolworths takeover bid
The Age
Thursday August 27, 2009
SHARES in Woolworths takeover target Danks Holdings have remained above the $13.50-a-share offer, leading to speculation Woolworths might have to increase its bid.But Woolworths boss Michael Luscombe is adamant that any Danks shareholders holding out for a better offer won't derail the company's plans to launch into the $24 billion hardware sector with its joint-venture partner, US group Lowe's.Danks shares fell 34, or 2.4 per cent, to $13.66 yesterday, 1.2 per cent above the Woolworths offer price.The share price may indicate that the market believes a higher offer will be needed to win control of Danks, or that a rival bid might emerge. The offer gap could also be due to the tightly held Danks share register: the Danks family €” who support the Woolworths offer €” speak for nearly 50 per cent of the issued capital.Danks' second-largest shareholder, Perpetual Investments, holds 13 per cent and also intends to accept.Meanwhile, there were differing opinions among analysts about Woolworths' strategy to break into hardware and challenge sector leader Bunnings, owned by Wesfarmers, with some concerned about Woolworths' growth anxieties."What concerns us is the culture that has crept into Woolworths in recent years, where it is, in our view, becoming a less financially disciplined organisation," said David Errington of Merrill Lynch.Mr Errington said he feared the push into hardware could dilute returns on investment for Woolworths shareholders and would not provide the company with the growth platform it wanted. He questioned the cost of securing sites to build large-format hardware stores and the sales that could be generated.The acquisition of Danks was queried because its small, independent customers had much to lose from Woolworths' plans to roll out as many as 150 hardware stores.Ben Gilbert, of UBS, said Woolworths' entry into hardware was well planned. "The two-pronged entry [wholesale and retail] and partnership with Lowe's was a positive surprise, and one which provides added confidence in the future success of the chain," Mr Gilbert said.Woolworths closed up 7 at $28.70.
© 2009 The Age
