Sena ups offer by 10c

Sena & Co has increased its takeover offer for 2 Cheap Cars (2CC) by 10c per share to 90c.

The company, which is owned by David Sena, the founder and chief executive officer of 2CC, launched its takeover bid for the automotive group on July 27. On September 9, the closing date for shareholders to accept the offer was extended to September 30.

The increased offer price applies to acceptances before and after September 16, which was the date of a letter sent to shareholders. 

“Sena & Co is of the view the business is best positioned to realise its potential as a private company enabling focused, founder-led decision-making,” says Sena. 

“More specifically, as evidenced by recent volatile trading conditions, being able to respond decisively to market conditions through investment is critical. 

“This may result in periods of heightened investment to expand into areas such as providing finance to customers or an increase in sales yards and or inventory. 

“Being able to make such decisions without regard to minority shareholders, many of whom rely on dividends, will maximise the long-term value of the business.”

In addition, Sena says economic conditions remain challenging. He notes interest rates have recently started rising again, with the Reserve Bank increasing the official cash rate to 2.75 per cent on September 2 and signalling further rises may follow. “A sustained higher interest-rate environment may adversely affect vehicle affordability and demand.”

He adds: “The upcoming general election introduces additional uncertainty. Opposition parties have proposed policy changes that, if adopted by a future government, could increase employment costs and strengthen the clean vehicle standard in ways that could materially increase vehicle acquisition costs. 

“The precise policies ultimately adopted would depend on the election result and any subsequent coalition or support arrangements. 

“However, Sena & Co considers these uncertainties reinforce the benefits of operating 2CC as a privately owned business where management can respond quickly to changing economic, regulatory and market conditions, and make investment decisions with a longer-term focus. 

“Based on shareholder feedback received to date, it has become clear the offer will not clear the minimum acceptance condition at $0.80 per share. Increasing the offer price is in the best interests of all shareholders and will maximise the prospect of a successful takeover.”

Sena says the higher offer price represents an “attractive” premium to 2CC’s share price before the takeover notice was lodged. It included a premium of: 

• 36 per cent on the last closing price on the NZX of 66c per share on July 9, which was the last trading day on the NZX before the takeover notice was lodged.

• 35 per cent to the one-month volume-weighted average price (VWAP) 66c per share.

• 40 per cent on the six-month VWAP of 66c and 56 per cent to the 12-month VWAP of 58c.

Sena explains the revised offer of 90c represents a multiple of 5.8 times 2CC’s earnings before interest, taxes, depreciation and amortisation of $8.1 million for the year ending March 31, 2026. 

He adds: “$0.90 is the final and best price Sena & Co is willing to pay and will not vary the offer price again. In addition, Sena & Co will not extend the closing date of the offer. Accordingly, the final closing date of the offer is September 30. 

“As at end of September 14, we received acceptances under the offer which total approximately 4.27 per cent of the ordinary shares. 

“The minimum acceptance condition will be satisfied once we receive acceptances which will result in Sena & Co holding or controlling 90 per cent or more of the voting rights in 2CC. 

“Sena & Co will not waive the minimum acceptance condition. If the 90 per cent threshold is not reached, the offer will lapse, shareholders will not receive their cash consideration of $0.90 per share and the stock will likely trade down towards or below the pre-announcement trading price of $0.66.

“Shareholders are strongly encouraged to accept the offer as soon as possible to help ensure the offer can proceed to completion and receive their cash consideration promptly once the offer conditions are satisfied.”

Reasons to accept offer

Sena has urged 2CC shareholders who have yet to accept to read the takeover offer document and target company statement. When deciding, he asks them to consider:

• 2CC’s independent directors have unanimously recommended shareholders accept the offer. 

• The final offer price of 90c per share is equal to the top end of the independent adviser’s valuation range stated in the independent adviser’s report included in the target company statement.

• The final offer price of 90c in cash per share represents a premium to 2CC’s recent share price trading, including a premium of 36 per cent to the last closing price of 66c on July 9, which was the last trading day on the NZX before the takeover was launched, and 56 per cent to the 12-month VWAP of 58c.

• As 2CC noted in an NZX announcement on August 14, trading in July was weaker than in the first quarter and trading conditions remained volatile. In a further update on September 15, 2CC reported unaudited net profit after tax of $330,000 for August and noted trading continued to be volatile. 

• “Listed peer” Turners Automotive Group’s share price “has fallen approximately 10 per cent from the date of the offer to last close on September 11”.

• Trading in 2CC’s shares is illiquid and the takeover offer presents an opportunity to sell for all-cash consideration.

• 2CC’s independent directors advised on September 7 that up until the day before no competing proposal had emerged for an alternative transaction. 

Sena adds there’s a likelihood of the share price falling towards, or below, its pre-offer level should the offer not proceed.