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ANALYSTS believe Patrick Corp's strident rejection of Toll Holdings' hostile takeover bid appears designed to extract a higher offer rather than persuade investors not to accept it.
Patrick chief Chris Corrigan released a target statement on Tuesday valuing his company at 25 per cent above Toll's takeover offer and deriding Toll as a low-growth trucking company.
But Deutsche Bank transport analysts Bruce Low and Matthew Prior said that if Mr Corrigan had really wanted to quash the takeover bid, he could have emphasised the anti-competitive nature of the merger, to increase the chances of the competition regulator blocking the deal.
"We understand the Australian Competition and Consumer Commission takes concerns of customers, including smaller customers, very seriously," the analysts said.
"By lobbying its customer base, we believe Patrick could significantly influence the regulatory outcome."
However, Mr Corrigan's tactics of discrediting Toll and its share value, while talking up his own business, would be more effective in drawing a higher offer from Toll, they said. Accordingly, on Tuesday Patrick had upgraded its full-year profit guidance by more than $12million and forecast annual earnings growth of 22 per cent over the next two years.
Patrick's directors have recommended shareholders reject Toll's offer of 0.4 Toll shares, 75c in cash and an in-specie dividend of 0.3 of Patrick's own Virgin Blue shares for each Patrick share.
Goldman Sachs JBWere analyst Paul Ryan said Toll could lift the cash component of the bid by $1 and still break even on the deal in the first year of the merger.
Mr Ryan also noted that Patrick had supplied no details of how it intended to pursue its aim of competing with Toll in land-based logistics if the merger were unsuccessful.
Patrick's bullish profit forecasts include increased earnings from the Pacific National rail-freight business it owns jointly with Toll and is currently trying to have split up over a contractual dispute.
Yesterday the two companies agreed on the appointment of an arbitrator to decide whether the Pacific National dispute is serious enough to warrant a break-up of the business.
Former NSW Supreme Court of Appeal Justice John Clarke has until November 7 to conclude his assessment of the issue, the very same day the competition regulator plans to release its initial findings on the Toll-Patrick merger.
If he decides that the dispute resolution procedure should be allowed to continue, Pacific National could be broken up between Toll and Patrick by the end of the year.
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