Keybridge Capital eyes $10m cash kitty with $7.4m Yowie bid

Yowie Group has urged shareholders to take no action following a $7.4 million takeover bid received from Keybridge Capital (ASX: KBC) in the latest salvo by the listed investment group to seize control of the Perth-based confectionary company.

The current offer by Keybridge, pitched at 3.4c per share, is priced at almost half the US$9.37 million ($13.75 million) in net assets recorded by Yowie at the end of FY23, with US$7.4 million ($10.86 million) of that figure comprising cash.

The Melbourne-based Keybridge Capital, headed by corporate raider Nicholas Bolton, already controls 35.66 per cent of Yowie’s shares, giving Bolton a seat on the company’s board.

Keybridge’s latest move on Yowie comes at a steep discount to a $20 million offer it launched in 2019, a bid that was subsequently abandoned after Yowie reported a deteriorating earnings performance at the time.

But since walking away from its takeover plans for Yowie in 2019, Keybridge has almost doubled its relevant interest in the company.

Keybridge launched its latest off-market bid last Friday ahead of the New Year holiday break, saying it intended to lift its stake in the company and ‘thereby achieve greater influence over Yowie’s future strategy and direction’.

The investment company says the bid provides Yowie shareholders with a certain cash value for their shares compared with ‘the uncertainty’ of a continued holding in the company.

While the offer price is pitched at a 9.68 per cent premium to the one-month volume weighted average price of Yowie shares up to 28 December 2023, and 17.24 per cent premium to the closing price the day before the offer was made, investors pushed the shares past the 3.4c bid price to 3.5c today.

Keybridge is attempting to pick up shares on market after instructing its broker Ord Minnett to buy Yowie shares ‘at or below the offer price’. Keybridge picked up about 100,000 shares on 29 December.

The investment group says it is aiming for a controlling interest in Yowie, with plans to make it a subsidiary of Keybridge.

However, if the latest campaign doesn’t push its shareholding past 50 per cent, Keybridge plans to lift its current board representation in accordance with any increase in ownership so that it can exert a bigger influence over the confectionary company’s business strategy.

Yowie Group slumped to a bottom-line loss of US$103,000 ($151,000) in FY23 as sales slumped 15 per cent to US$13.3 million ($19.5 million) with the result hit by rising costs and weaker consumer discretionary spending.

As the company’s manufacturing base is located in the US, Yowie’s Australian margins were also affected by a weaker Australian dollar.

The company last year announced the acquisition of the Bluey seasonal confectionery license for the next three years in Australia and New Zealand that will see Yowie launch six new products for Easter this year.

In August, Yowie acquired Ernest Hillier, Australia’s oldest chocolatier, from administrators in a deal worth $375,000.

Yowie is currently being led by executive chairman Sean Taylor following the departure of Mark Schuessler as CEO last July. The search for a replacement CEO continues.

In its bidder’s statement, Keybridge has played on the underperformance of Yowie’s shares in recent years with the shares trading as high as 4.7c last January.

“If Keybridge’s offer is unsuccessful and Keybridge cannot otherwise give effect to its intentions, the return on your investment in Yowie shares will be dependent on an investment strategy to be determined by the existing Yowie board,” Keybridge chairman John Patton tells Yowie investors.

However, the Yowie board has urged shareholders to ‘take no action’ until the board makes a formal recommendation.

“The Yowie board will keep shareholders informed of further developments as they occur,” the company says.