F&P Finance rating bolstered by takeover
Standard and Poors' has said it may increase Fisher and Paykel Finance's rating if Haier is successful in its takeover of the parent company.
Thursday, September 13th 2012, 2:41PM
The ratings agency says that its BB long-term issuer credit rating on Fisher & Paykel Finance have been placed on CreditWatch with positive implications, following Haier issuing its takeover notice.
Haier already owns a stake in Fisher and Paykel Appliances and has a lock-up agreement with a large shareholder, which takes its potential interest to 37.46%. This gets it closer to the 50% required for the offer to proceed.
The $1.20 a share cash offer is at a significant premium to the pre-existing share price, and F&P Appliance's independent board is supportive of Haier’s offer on the following basis:
- The offer price must be within or above the valuation range, as determined by the independent advisor;
- There is no superior alternative for F&PAHL and its shareholders; and
- The terms and conditions of the offer being acceptable.
The above-mentioned events raise the likelihood of offer acceptance, S&P says.
Should the takeover offer succeed, our rating on F&PFL may be raised to ‘BB+’, which would be a level consistent with the stand-alone credit profile (SACP). This is because we believe that the takeover is likely to result in an improvement in the credit profile of F&PAHL. The rating on F&PFL is currently constrained by our view that the company may only be rated up to a limit better than the credit profile of its parent.
In our view, F&PFL is likely to remain a non-strategic subsidiary of Haier Electronics. As a result, we do not expect the rating on F&PFL to receive any uplift from parent support. Additionally, we also consider that there is a small risk that the takeover could result in the weakening of F&PFL’s SACP, for example due to Haier Electronics deciding to maintain a weaker capitalization at F&PFL. Nevertheless, in our view, the risk of such a development is remote, due to its potential impact on F&PFL’s business or any future divestiture plans.
Although less likely, if the takeover becomes likely to not proceed then we are likely to affirm all ratings and remove F&PFL from Credit Watch positive.
Standard & Poor’s expects the Credit Watch to be resolved after we review F&PAHL’s credit profile following the completion of the takeover process.
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