Diversified financial services company MMC Contrarian has labelled a takeover bid from Guinness Peat Group (GPG) as "opportunistic" and has advised MMC shareholders to reject the offer price of 48 cents per share.
In a statement to the market, MMC said its independent directors are of the opinion that the offer did not represent full value for the company and is opportunistic, as it was priced below the company's cash backing, net tangible assets before tax and net assets before tax.
"MMC is in a sound financial position with $78.9 million in cash reserves and no interest bearing debt as at 30 June 2009," MMC said.
"An increase in Guinness Peat's shareholding in MMC is not considered likely to provide commercial assistance to MMC, as Guinness Peat is already a supportive cornerstone shareholder."
GPG is currently MMC's largest shareholder, with a stake of nearly 30 per cent.
MMC said its independent directors recognised that the offer provides a period of liquidity for what has recently been a thinly-traded stock.
"This may be attractive to some MMC shareholders, particularly those who may not wish to remain invested in MMC's stated strategy of becoming an integrated wealth management business with a focus on financial planning," MMC said.
"In pursuing that strategy, the board does not currently intend to return any more cash to shareholders by way of capital return or share buy-back."
Regarding its strategic plan and outlook, MMC said it is examining further acquisition opportunities and will continue to adopt a cautious and disciplined approach and assess each opportunity on a case-by-case basis.
"The financial planning and finance industry is going through a period of what appears to be significant regulatory change, with various regulators and other parties calling for a ban on commissions and a transition to a fee-for-service offering," MMC said.
"The independent directors believe that these changes present opportunities for MMC and do not necessarily represent a fundamental threat to the enunciated corporate strategy.
"However, a greater degree of regulatory uncertainty around the financial planning industry may change valuation metrics for financial planning businesses."
GPG, through its subsidiary Ecurb Australia, made the offer for MMC on 8 September 2009.
