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26th Jun 2004, 04:40
Skywest directors reject takeover bid
SEAN SMITH - BUSINESS EDITOR
Skywest has urged shareholders still reeling from its horror profit downgrade to reject CaptiveVision Capital's takeover bid after directors yesterday dismissed the offer as too low.
The regional airline's board used Skywest's target statement to reject unanimously the 20¢-a-share offer based on independent expert PricewaterhouseCoopers' finding that the bid was "reasonable but not fair".
The offer falls within PwC's valuation range for Skywest of 19.8¢ to 28.6¢ an ordinary share, but is below its "preferred" value of 24¢, which values the company at $24.4 million.
However, PwC said "there are reasonable grounds to accept the offer in the absence of an alternative offer emerging, which we consider to be unlikely".
The Skywest board criticised the bid as opportunistic and highly conditional, reminded shareholders that it did not include the company's convertible notes and options, and said Singapore-based CVC lacked a track record in the airline industry.
It claimed also that CVC's offer did not recognise Skywest's growth prospects. And even after allowing for Monday's shock earnings revision which has clouded its outlook, "Skywest's recent performance has been strong, illustrated by the return to profitability and the platform for growth set with increasing passenger numbers, newly acquired aircraft and new routes," directors said.
"The price does not reflect the real opportunity for the company," chairman Pat Ryan said yesterday. "There's a great deal more value in the company than 20¢."
However, it may have a tough time convincing shareholders, angered by the downgrade, not to sell into the offer.
A shareholders meeting requisitioned by CVC for Monday with the purpose of dumping Mr Ryan will test shareholder support. "(The downgrade) certainly was extremely distressing and has certainly shaken the bonds between shareholders and the board . . . and they want to know what is going on," Mr Ryan said.
The earnings cut, attributed to over-optimistic forecasts related to new jet services in the North-West, higher fuel costs and a payout to former chief executive Bill Meeke, slashed forecast 2003-04 net earnings to $700,000 from $2.4 million.
After accounting for the one-offs, including the undisclosed payment to Mr Meeke and the costs of the takeover defence, Skywest estimates "normalised" annual profit at $2.13 million before tax.
It drew comfort from PwC's comments that the revised 2003-04 forecast was not "representative of the reasonably expected longer term earnings" as they did not include the full-year impact of the new jet services.
But PwC also warned that Skywest's undisclosed 2005 profit forecast was "heavily dependent" on the take-up of the services amid "considerable uncertainty" over the level of passenger support.
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But PwC also warned that Skywest's undisclosed 2005 profit forecast was "heavily dependent" on the take-up of the services amid "considerable uncertainty" over the level of passenger support.
maybe a rethink of the phe/kta services will be on the cards, as well as running jets into places like lea and kgi for the longer term.
SEAN SMITH - BUSINESS EDITOR
Skywest has urged shareholders still reeling from its horror profit downgrade to reject CaptiveVision Capital's takeover bid after directors yesterday dismissed the offer as too low.
The regional airline's board used Skywest's target statement to reject unanimously the 20¢-a-share offer based on independent expert PricewaterhouseCoopers' finding that the bid was "reasonable but not fair".
The offer falls within PwC's valuation range for Skywest of 19.8¢ to 28.6¢ an ordinary share, but is below its "preferred" value of 24¢, which values the company at $24.4 million.
However, PwC said "there are reasonable grounds to accept the offer in the absence of an alternative offer emerging, which we consider to be unlikely".
The Skywest board criticised the bid as opportunistic and highly conditional, reminded shareholders that it did not include the company's convertible notes and options, and said Singapore-based CVC lacked a track record in the airline industry.
It claimed also that CVC's offer did not recognise Skywest's growth prospects. And even after allowing for Monday's shock earnings revision which has clouded its outlook, "Skywest's recent performance has been strong, illustrated by the return to profitability and the platform for growth set with increasing passenger numbers, newly acquired aircraft and new routes," directors said.
"The price does not reflect the real opportunity for the company," chairman Pat Ryan said yesterday. "There's a great deal more value in the company than 20¢."
However, it may have a tough time convincing shareholders, angered by the downgrade, not to sell into the offer.
A shareholders meeting requisitioned by CVC for Monday with the purpose of dumping Mr Ryan will test shareholder support. "(The downgrade) certainly was extremely distressing and has certainly shaken the bonds between shareholders and the board . . . and they want to know what is going on," Mr Ryan said.
The earnings cut, attributed to over-optimistic forecasts related to new jet services in the North-West, higher fuel costs and a payout to former chief executive Bill Meeke, slashed forecast 2003-04 net earnings to $700,000 from $2.4 million.
After accounting for the one-offs, including the undisclosed payment to Mr Meeke and the costs of the takeover defence, Skywest estimates "normalised" annual profit at $2.13 million before tax.
It drew comfort from PwC's comments that the revised 2003-04 forecast was not "representative of the reasonably expected longer term earnings" as they did not include the full-year impact of the new jet services.
But PwC also warned that Skywest's undisclosed 2005 profit forecast was "heavily dependent" on the take-up of the services amid "considerable uncertainty" over the level of passenger support.
------------------------------------------------------------------------------------
But PwC also warned that Skywest's undisclosed 2005 profit forecast was "heavily dependent" on the take-up of the services amid "considerable uncertainty" over the level of passenger support.
maybe a rethink of the phe/kta services will be on the cards, as well as running jets into places like lea and kgi for the longer term.