Hellaby chief labels Bapcor a cheapskate as takeover battle fires up

Simon Evans

Updated Oct 5, 2016 – 3.38pm, first published at 12.36pm

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The chief executive of $307 million takeover target Hellaby Holdings has labelled Australia's largest car parts maker Bapcor a cheapskate and warned it needs to be prepared for a long and drawn-out tussle in the takeover battle for the New Zealand group.

Alan Clarke, the chief executive of Hellaby told The Australian Financial Review on Wednesday that while there would be a formal response and process adhered to in the wake of Bapcor's $NZ3.30 per share takeover offer last week, the bid was way too cheap and lobbed at a time when a new strategy was being undertaken.

"We think the offer is very opportunistic and at the very low end of any valuation range," Mr Clarke said.

Bapcor chief executive Darryl Abotomey is going after NZ's Hellaby Holdings but the Kiwi company thinks it is being a cheapskate. Jesse Marlow

Mr Clarke said he had abandoned a 10-day roadshow that he had previously embarked upon to update shareholders in New Zealand about the new Hellaby strategy to focus on the automotive and resource services groups in the Hellaby business.

"I was probably about three-quarters of the way through it," he said of the roadshow.

He conceded Bapcor had been a stellar performer on the Australian Securities Exchange, but that Hellaby's automotive business should be able to replicate a similar upward trajectory.

"That is the opportunity that Hellaby's shareholders have before them," Mr Clarke said. He said Burson had had a "stunning run" on the ASX.

Bapcor, formerly known as Burson Group until a name change in July, was floated on the ASX in April, 2014 with an issue price of $1.85 per share. It is now trading at $6.28, with the company having made yet another small acquisition on Wednesday, paying about $17 million to acquire the specialist wholesale diesel business of MTQ Engine Systems. MTQ Engine Systems is the largest diesel and turbocharger after-market sales and service provider in Australia and has 10 branches in Australia.

Bapcor chief executive Darryl Abotomey said the price paid for the MTQ business was "in line with industry benchmarks" for other transactions in the sector over the past few years.

Mr Clarke said it was flattering that Bapcor had made the bid for Hellaby, and there was a long way to go in the entire process.

"I would almost certainly say so," he said, referring to the likelihood of a long and drawn-out battle.

Bapcor supplies more than 500,000 car parts to independent mechanics around Australia, and to chains including Ultra Tune and Kmart Tyre and Auto. It acquired the automotive operations of Metcash in mid-2015 for $275 million, which also gave it control of the Autobarn, Autopro and Midas Mufflers businesses.

Hellaby also operates New Zealand's largest footwear retailing chain with 117 stores under the banners of Hannah's, Hush Puppies and Number One Shoes.

Bapcor intends selling the non-automotive operations if its takeover is successful.

Bapcor's strategy has been a dual one of driving organic growth along with acquisitions in an industry that was highly fragmented. Smaller players were finding it increasingly difficult to compete in a sector where mechanics require car parts firms to carry large levels of inventory across hundreds of types of vehicles that are increasingly complex to service and repair.