Dorchester in $82m Turners bid

Dorchester Pacific plans to offer $3 a share in cash, shares and notes for Turners Auctions after winning support from chairman Michael Dossor. This values the auction company at $82 million. The offer will amount to a 9.1 per cent premium on Turners’ most recent trading price of $2.75. Dorchester says it will require the auction house to pay a fully imputed special dividend of 15 cents a share when it has acceptances to give it more than 50 per cent of the company. The vehicle finance company currently owns 19.85 per cent of Turners while the target company’s chairman owns 20.8 per cent through Bartel Holdings for a combined stake of 40.65 per cent stake. It will offer either $3 a share cash, two-year notes that pay interest of nine per cent and convert to Dorchester shares, ordinary shares of Dorchester or any combination. Bartel, which has entered a lock-up agreement with Dorchester, has agreed to accept 60 per cent ordinary shares and 40 per cent convertible notes. The finance company adds the takeover is conditional only on achieving at least the 50.1 per cent control required under the Takeovers Code. Paul Byrnes, chief executive officer of Dorchester, says there is a natural alignment and synergy between Turners Auctions and the finance company, “which we talked about at the time of our investment in Turners”. He adds: “Seventy per cent of our finance lending is for motor vehicles and our insurance business has a focus on vehicle-related insurance products.” Grant Baker, Dorchester’s chairman, says after the transaction its balance sheet “will still remain relatively conservative”, giving the company room to pursue further acquisitions. Turners stock was put in a trading halt, while Dorchester rose 4.6 per cent to 23 cents and is little changed this year. Dorchester expects to raise $25 million to $27.5m by selling shares at 25 cents each to Turners stockholders, including Bartel and via a placement. It says its also expects to issue about $15m of convertible notes to Bartel and other parties. Final details will depend on what combination of cash and securities Turners’ shareholders accepted. Dorchester is planning to make a formal takeover offer in August, with resolutions about the takeover being put to its annual meeting. It’s thought a successful deal may lift Dorchester’s 2016 pre-tax earnings to $20-$25m from $10-$11m forecasted for the current year from existing business.