MTF board says Turners offer undervalues lender, Heartland bid uncertain
By Paul McBeth
Oct. 14 (BusinessDesk) - The board of Motor Trade Finances has given lukewarm responses to rival suitors wanting to
build a cornerstone stake in the auto lender, saying one undervalues the company and the other proposal is too
The Dunedin-based financier has competing bids by financial services firm Turners and bank Heartland New Zealand which
each want to buy up to 20 percent of MTF. Heartland yesterday said it would trump Turners' offer of $1.15 a share,
paying $1.50 a share for between 10 percent and 20 percent, and was still keen on mounting a full takeover bid. The
rival bid emerged as Turners' offer draws nearer to its Oct. 17 closing date.
MTF's board hasn't formed a view on the merits of Turners owning 10 percent of the company, but said the firm's offer
was below its internal valuation range of $1.39-to-$1.71 a share. It noted that the offer represented a premium to the
price the shares had traded at over the past year and presented an exit opportunity for shareholders who no longer
originated loans with MTF.
Turners currently holds 218,452 MTF shares, amounting to almost 1 percent of the stock. It would need the support of the
target's board to acquire a fifth of the company, because MTF's constitution has restrictions on holdings above 10
In relation to the potential Heartland bid, the board said it was uncertain whether an unconditional offer would emerge,
as Turners could build up a 10 percent blocking stake to prevent a full takeover in the future, which would scotch
further interest from the bank.
Heartland also made a full takeover bid contingent on MTF having no actual, claimed, or potential liability for excess
fees charged in 39 loan contracts originated by Sportzone between May 2005 and July 2008, in a case brought against the
lender by the Commerce Commission. Sportzone had an agreement with MTF allowing the defunct motorcycle business to write
credit contracts for buyers of motorcycles, and the case is set to be heard in the Supreme Court next month.
"In the board's view, Heartland's primary interest is in making a full takeover offer for MTF which, given the due
diligence requirements and other issues that need to be resolved, cannot be made in the near term," chairman Stephen
Higgs said. "The board's view is that Heartland is a competitor with whom we have no wider business relationship and the
board is extremely unlikely to recommend a transaction that allows Heartland to own more than 10 percent of the voting
shares of MTF (other than as part of a full takeover offer that was being recommended by the board for reasons of
MTF has $40 million of perpetual preference shares listed on the NZX's debt market paying annual interest of 5.11
percent. The notes last traded at $70 per $100 face value.