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FLSmidth gains conditional clearance for Ludowici bid

by Paul Whitfield | Published February 28, 2012 at 12:47 PM

Denmark's FLSmidth & Co. A/S gained clearance Tuesday, Feb. 28, to proceed with its A$388 million ($415 million) offer for Australia's Ludowici Ltd., but will have to pay compensation to shareholders who sold up in response to its original offer, Australia's takeovers regulator ruled.

The decision is a blow to Ludowici's rival suitor, Weir Group plc, which had asked the Takeovers Panel to block FLSmidth's A$11 per share bid because of comments from FLSmidth CEO Jørgen Huno Rasmussen in a Jan. 23 Reuters report suggesting that its initial A$7.20 per share offer was final.

The Takeovers Panel noted in its ruling Tuesday that the Reuters comments were not corrected for about eight days, when FLSmidth issued a press release noting that it "reserves the right" to increase its bid.

"The Panel considered that, by FLS not issuing a correction until on or about 31 January 2012, the acquisition of control over Ludowici shares did not take place in an efficient, competitive and informed market," the regulator said.

It ordered FLSmidth to place advertisements in newspapers offering as much as A$2.67 per share in compensation to investors who sold Ludowici shares between Jan. 23 and Jan. 31. The figure is based on the difference between the initial offer of A$7.20 and Ludowici's volume-weighted average share price of A$9.87 on Feb. 16, when FLS increased its offer to A$10 per share.

That bid was a response to Weir's A$7.92 per share offer of Feb. 13. Weir on Feb. 23 matched FLSmidth's A$10 bid, prompting the Danish company to return once more, with an increased offer of A$11 on Feb. 24.

"The maximum aggregate amount of compensation cannot exceed A$2.9 million," FLSmidth noted in a statement published Tuesday. "FLSmidth expects the actual amount of compensation payable to be lower."

The Takeovers Panel ruling gives the parties two days to appeal, and FLSmidth said it was considering its position.

The board of Brisbane, Australia-based Ludowici, which makes mining equipment, said Tuesday that it would back the FLSmidth bid. The A$11 per share offer values the target's shares at a 214% premium to their pre-bid valuation on Jan. 18. Ludowici directors controlling 22% of the company have agreed to tender their shares to the offer.

Valby, Denmark-based FLSmidth is offering about 14.7 times Ludowici's A$26.4 million Ebitda in 2011. Ludowici, led by chairman Phil Arnall, made A$220.3 million in 2011 revenue. Outside Australia, it sells products to mining companies in South America, India, China and Africa.

FLSmidth manufactures equipment for the cement and mining industries. Its shares traded Tuesday at 449.7 Danish kroner ($81.17), up Dkr3.4, or just under 1% on their previous close. Ludowici shares closed Tuesday at A$11.18, up A$0.14, or 1.3%. Shares in Weir, a Glasgow, Scotland-based diversified engineering group, fell to 2,182 pence ($34.60), down 48 pence, or 2.15%.

Ludowici is being advised by ICS Advisory and is taking legal counsel from Sydney law firm Gilbert + Tobin. FLSmidth is receiving financial advice from FIH Partners and legal advice from Sydney's Blake Dawson. Weir is taking financial advice from UBS and legal advice from Freehills.

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