Transaction Overview
Transaction
Sale of Promentum to GEON Group
Date
December 2006
Deal Value
$160 million
PCP Role
Financial Adviser to Promentum
Sale of Promentum
Transaction
Sale of Promentum Limited (“Promentum” or the “Company”) to GEON Group (“GEON”) by scheme of arrangement for $160 million.

Scope of Advisory Services
Promentum engaged Pitt Capital Partners (“PCP”) as its sole financial advisor in relation to the receipt of an unsolicited takeover offer by GEON Group via scheme of arrangement.

Process
Shortly following receipt of the takeover offer from GEON, Promentum provided a trading update, downgrading profits for the financial year ending June 2006. As a result, Promentum's share price suffered a 34% decline, decreasing from $1.51 to $0.99.  As a consequence, GEON (backed by Gresham Private Equity) withdrew its original offer stating that the profit assumptions used in their valuation of Promentum had materially changed and, whilst still interested in a potential transaction, would submit a revised proposal based on new assumptions.

On PCP’s advice, Promentum undertook a strategic review of its operations and implemented numerous cost-cutting initiatives in an attempt to improve profitability. GEON’s revised offer was then rejected on the basis that it substantially undervalued the Company. This decision was also supported by an independent expert’s valuation which stated that the revised price was below Promentum‘s  fair valuation range. PCP’s advice to undertake a strategic review to restore profitability prior to engaging interested parties on potential takeover offers positioned the Company in a stronger bargaining position.

PCP was able to tailor a solution to Promentum’s needs by evaluating the Company’s various strategic options which would deliver maximum value to shareholders. Not only did PCP approach various parties for expressions of interest for a full takeover, but evaluated opportunities for long-term value adding acquisitions. The result was a competitive bid process for Promentum, which was viewed as the prize asset in the Australian sheet-fed print sector for private equity players.

Outcome
By introducing multiple parties to the bidding process, PCP was able to achieve a price for Promentum which exceeded the top end of the independent expert’s valuation range of $2.13. The shareholder vote on the Scheme of Arrangement was 99% in favour of the takeover. The final takeover price of $2.25 was a premium of approximately:
  • 162% to Promentum’s 52 week low of $0.86;
  • 74% to Promentum’s 3 month VWAP up to and including 1 December 2006, the last trading day before Promentum announced the receipt of conditional proposals regarding its ownership; and
  • 76% to Promentum’s 1 month VWAP up to and including 1 December 2006.