F&P Rebuffs Haier, New Bid Coming? 斐雪派克拒绝海尔，会出现新收购价吗？
In what looks suspiciously like a game of “good cop, bad cop”, independent directors of New Zealand home appliance maker Fisher & Paykel (NZ: FPA) have just recommended that the company’s shareholders reject a takeover offer from Chinese home appliance giant Haier (HKEx: 1169) because it is too low. I use the expression “good cop, bad cop” here to refer to a tactic often used by salesmen working in pairs when trying to confuse a buyer into paying a higher price for something. One salesman typically plays the role of “good cop”, acting like he’s the buyer’s friend and trying to get him the best deal, while the other plays the role of “bad cop”, demanding a higher price. In reality, both salesmen have the same goal in mind, namely getting the buyer to pay a higher price.
The analogy seems appropriate here because it looked like Haier had already consulted with F&P’s management earlier last month when it made its offer of NZ$1.20 for each F&P share, marking a handsome 60 percent premium over the company’s recent trading levels and valuing it at more than $700 million. (previous post) Haier already owns 20 percent of F&P after buying that stake in 2009, and was looking to boost the figure to a majority. F&P’s second largest shareholder, which holds 17 percent of the company, had already agreed to Haier’s original offer price, and all indications were that Haier had consulted with both the company’s managers and its largest shareholders before launching its bid in order to determine a fair price.
So now this latest rejection by F&P’s independent directors comes as a bit of a surprise, especially since those directors are saying F&P shares should be valued at NZ$1.28 to NZ$1.57 each, or as much as double the level where they were trading just before rumors of the original offer emerged last month. (English article; Chinese article).
To return to my “good cop, bad cop” analogy, this unexpected turn looks a bit like F&P’s management is playing the role of “good cop” by helping Haier to determine the initial offer price, while the independent directors are playing the role of “bad cop” in now asking for more money. Of course, the end game in this is to squeeze as much money out of Haier as possible and force it to offer a higher bid for shareholders, which is theoretically what a company’s managers and directors should be doing.
From my perspective, I find this game a bit unusual and manipulative, and suspect that F&P is trying to get Haier to pay some more money by taking advantage of the fact that the Chinese company is inexperienced at global M&A. So if I were Haier, how would I respond to this new twist? Much of it depends on how much Haier really wants to do this deal. Technically speaking, it could raise its offer without too much extra cost to NZ$1.28, which is just 7 percent above its current bid, to make the independent directors happy.
Fisher & Paykel shares rose to NZ$1.23 after the independent directors made their recommendation, meaning at least some investors must feel that Haier will raise its bid. But frankly speaking, I think that Haier should fight back and stick to its NZ$1.20 bid to show that it won’t allow itself to be manipulated this way. If it takes a tough stance and the bid ultimately fails, F&P shares are likely to plunge back down to their previous levels, which certainly wouldn’t look good for the independent directors who are trying to squeeze more money out of this Chinese newcomer to global M&A.
Bottom line: Haier should refuse to raise its bid for Fisher & Paykel and instead reiterate its current offer, showing it won’t allow itself to be manipulated by the company.
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