Takeover bid for Tourism Holdings
Valuecruncher Valuation Report – Tourism Holdings Limited
Yesterday Australian company MFS Living and Leisure announced a $2.80 per share takeover offer for Tourism Holdings Limited. Tourism Holdings share price closed at $2.74 following the announcement, up significantly from the $2.27 closing price on Friday. Tourism Holdings operations include a number of high profile tourist attractions, a fleet of rental cars and campervans and Fullers Bay of Islands.
Valuecruncher has placed a mid-point valuation of $2.32 per share on Tourism Holdings with a range of $1.92 to $2.73. The mid point valuation is consistent with the pre-offer price of $2.27, the takeover offer and current market price are slightly higher than the upper end of the Valuecruncher valuation range. Valuecruncher’s valuation is based on EBIT growth of 21% annualised over the next 3 years, a terminal growth rate of 4.1% (reflecting the potential of New Zealand’s tourism industry) and a cost of capital of 13% (based on PWC’s December 2006 Cost of Capital Report).
The difference between the Valuecruncher mid-point and the takeover offer should not be interpreted as a premium for control. The Valuecruncher valuation is based on high level analysis and difference between the two prices could be attributed to alternative valuation assumptions relating to growth and cost of capital (WACC). The MFS Living and Leisure offer may include the value of synergies they believe they can extract from integrating Tourism Holdings with their existing operations. The calculation of the value of any synergies is very subjective and it is debatable how much of these synergies MFS Living and Leisure would be willing to pay away to the current Tourism Holdings shareholders.
Valuecruncher will observe the process with interest and looks forward to the release of the independent advisor’s valuation report.