Cheeky work from Solomon Lew lobbing in a low-ball bid for Just Group, denying it's hostile and claiming it's a "fantastic opportunity for Just Group shareholders''.
Cheeky work indeed.
His implied offer price is even pitched at a 10% discount to Just's average trading price over the past six months.
Bear in mind the bid from Lew's Premier Investments is a mix of both Premier scrip and cash: $2.20 in cash and 0.025 in Premier shares for each Just share to be precise.
Thanks to a successful PR assault on the newspapers - one even dubbed Sol "King Solomon the Wise'' - the businessman has almost managed to frame his tilt at Just as a friendly bid.
A "friendly'', for those not au fait with the rhetoric of takeovers is one where the target company board has agreed in principle to accept an acquisition proposal.
Unless a wrong number was dialled, it would appear that the target board of Just didn't even entertain a telephone call from Sol or his advisors before Premier slipped through its pitch in the fuming aftermath of the Opes Prime debacle.
Now they are being asked to countenance an offer which will swap their liquid Just stock for some cash and shares in an illiquid company run by Sol as executive chairman with a couple of the boys from Sir Ron Brierley's GPG thrown in for good measure.
Sol has adopted an imaginative approach to valuation for his campaign.
He values Just at $4.11 to $4.46 a share but uses different methodologies to get to these two numbers.
The top of the range is based on NTA, net tangible asset values, that is.
"Questionable'', would be a polite epithet for this approach.
Sol and his advisors from UBS have decided that they will value their offer for Just on what directors of Sol's bidding vehicle, Premier Investments, reckon Premier shares are worth.
Not what they are trading at, note, but what directors reckon they should be trading at.
For the low end of the Just valuation range, that is $4.11 per share,Team Lew conveniently switches to a VWAP methodology. VWAP means volume weighted average price and in this case, naturally, they have decided to calculate VWAP, not over the three-month period before the offer - the time frame typically favoured in takeover bids -but just over the past four weeks.
Since Just shares have been bombed out - not only from a dramatic downswing in sentiment towards the retail sector, not only from the chaotic credit-market-driven plunge in world equity prices, but also from Just's exposure to the Opes Prime debacle.
When Sol says this is not a hostile bid - "I can't be hostile; I'm the major shareholder" - he might be right, it's verging on comical.
The offer also includes Just's 10.5c dividend so the implied offer range would be more appropriately characterised as $4.01 to $4.36.
Just shares scaled a high of $5.88 on November 1 last year, and while nobody would take seriously a claim that a takeover bid should relate to the high-point in the biggest bull market in history, the current implied offer, even on Premier's numbers, is $4.11 which represents a 30% discount to Just Group's high.
More relevant is Just's closing share price on the day before the bid. That $3.52 a share was towards the lowest point in the 12 months before the offer materialised. (The share dipped to as low as $3.25 on March 3.)
What are the brokers saying?
The average broker valuation for Just is presently $4.49 a share.
The majority of analysts - including Macquarie, JP Morgan, Goldman Sachs, Citigroup, ABN Amro and Commsec - value Just above the top end of Premier's $4.46 pitch.
Mind you, the brokers are generally on the high-side when it comes to valuations. It's good for business.
Even UBS, which is advising Premier on the other side of the Chinese Wall, had a target price of $4.80 on Just.
Typically in a takeover, a premium of 30% will be demanded by shareholders in the target company for the change of control.
Where there are plenty of synergies though - in other words the buyer stands to gain significantly from combining the two companies while taking control - the premium would often be higher.
In the case of Sol's company Premier, it could be argued that there is strategic value to be had from buying Just.
Premier is relatively illiquid so the infusion of Just Group shareholders on the Premier register delivers Sol thousands of people who will trade his stock and possibly bring the Premier share price closer to NTA.
Sol also stands to benefit from his retail expertise - his family owns other retail assets such as Nine West, Zara and French Connection - although the most obvious savings he can make are in eliminating Just's head office and a few staff.
Comparable offers are perhaps the best indicator of value and on the brokers' reckonings, the Premier bid falls short again.
Recent comparable transactions include Brett Blundy's mop-up of Brazin pitched at an EV/EBITDA multiple of 13.6x, Archer Capital's bid for Rebel Sport (12.3x), ARH Investments' initial bid for Colorado (9.9x) and its minority takeout (12.5x). Those are on Goldman Sachs' numbers.
Goldman says "The (Just) takeover offer reflects a FY08 PER of 12.5x and EV/EBITDA of 8.8x. This compares to EBIT multiples of 9.9x and 13.6x for comparable transactions in 2006 and early 2007.
According to Macquarie, the offer is at the low end of recent transactions in the sector and would not appear to factor in much of a ''control premium''.
Credit Suisse says the offer falls at the "low end of recent Australian discretionary retail transactions and Citigroup says "8.7x FY08 EV/EBITDA, a discount to recent transactions of 9.7x - 11.8x EV/EBITDA.
A bid is a bid and Sol may get up with this El Cheapo play.
But even in the current climate of uncertainty, any bid below $5 for Just is unlikely to win control.
Not only is there the prospect of a rival offer but the likelihood that Premier will pitch a better price.
Premier is highly illiquid, trading just 15,000 shares on average a day one month before its shot at Just - more exclusive than a Chanel boutique you might say, while shares in its prey turn over like the cash register at the Pitt Street Just Jeans store.
What Sol does have on his side though is time, lots of time and patience. Painfully hanging around as executive chairman of Coles Myer during the Coles malaise of the 1990s is proof of that. If the institutions are looking out two quarters, Lew is looking out at least two years. Were any rival to take him on they would be in for a nasty time. He already has his foot on the largest stake in Just.
If he were offering cash around these levels he might get away with it, but seeing this risible bid involves Premier scrip he's got buckley's. No one will exchange their liquid stock in Just - which until the past few months had done well since its relisting - for Premier paper which trades by appointment.
Just Group shares closed up 0.75%, or 3 cents, at $4.02. Premier shares closed down 2.56%, or 20 cents, at $7.60.
mwest@fairfax.com.au
