Heiton's institutional shareholders are supporting the builder's merchant and DIY group's board in its opposition to Grafton's €325 million bid for the company, chief executive Mr Leo Martin said yesterday.
Speaking after a press conference at which he again made it clear that the board believes that €6.35 per share offered by Grafton undervalues the business, he said the company had contacted its institutional shareholders after Grafton last week indicated that it was considering making a formal €6.35 per share offer for the company.
He said that the board had made its position clear to the institutions, and asked them not to take any action for the time being.
"Thirteen of fourteen of them have indicated that they will support us," he said.
Grafton, which owns the Woodies DIY chain, already holds 29 per cent of its smaller rival, whose flagship business is Atlantic Homecare.
Mr Martin told the press conference that Grafton's offer failed to value Heiton and its prospects adequately.
"It fails to reflect the strategic value of Heiton to Grafton," he said. "We believe that it may be designed to frustrate Heiton's own ability to grow by acquisition."
Heiton is arguing that taking its proposed final dividend per share of 10.7 cent, the offer was really valued at €6.243. Mr Martin said that the offer, representing a multiple of 12 times earnings before goodwill and exceptionals, was a 7 per cent discount on Heiton's Friday closing price of €6.70. He argued that as the offer is really valued at €6.243, this represented a 20 per cent premium on its closing price of €5.20 on June 16th.
Mr Martin condemned the offer as a "speculative attempt by a major shareholder to benefit from Heiton's future potential at the expense of existing shareholders".
Mr Martin said that in the interests of its shareholders, the board had told Grafton that it was willing to continue talks with the company. However, he said he could not comment on what price the board considered would represent good value for the business.
Heiton yesterday reported that it pre-tax profits rose 29 per cent to €28.8 million in the year to April 30, 2004, while sales grew by 5 per cent to €503 million during the same period. Earnings per share increased by 23 per cent to 53.1 cent. The company said that sales in May were up 14 per cent on 2003, aided by the good weather.
"The group's performance has been excellent in the year under review," Mr Martin said. He added that all divisions of the business in the UK and Ireland had contributed to this and said that profitability and cash generation had improved across the group.
