A new twist in Purmo's bid saga

Translation: Original comment published in Finnish on 07/25/2024 at 8:34 am EEST

 Purmo's Board of Directors announced that it maintains its recommendation for the Grand Bidco consortium’s bid despite the higher competing bid. The consortium previously announced that it would withdraw from the bidding or, more specifically, not raise its previous bid. This is not what we expected, as we believed that the Board of Directors would recommend Haier’s offer and Purmo would eventually end up with Haier based on a much higher price. We feel it is advisable for the shareholder to wait for the possible completion of the higher bid and not to accept the bid recommended by the Board of Directors, as the difference between the bids on the table is attractive despite the later completion date of the higher bid.

The Board finds Haier’s offer more risky, but considering what we know now, we find the argument questionable

The Board of Directors considers Haier’s competing offer to be risky and, therefore, continues to recommend the lower bid from Grand Bidco. According to the release, the risks are related, e.g., to the longer time frame of the competitive bid. Haier’s bid would be completed approximately two quarters later than the consortium’s bid (Q4’24-Q1’25). In relative terms, considering the premium offered by Haier’s competing bid (+20% higher), we feel the risk related to the longer time frame raised by the Board regarding the bid remains rather negligible. Purmo’s Board of Directors also does not believe that Haier’s offer will receive enough support, which we believe proves that Rettig is not ready to sell their share (61.8% of the votes). Furthermore, according to the release, the Board has not received enough information as to whether other owners who irrevocably committed to the previous bid will terminate their commitment. We believe the shareholders irrevocably committed to Grand Bidco’s bid are entitled to withdraw their consent as Haier’s bid exceeded the EUR 13.52 limit of the irrevocability clause set by Grand Bidco.

If irrevocably committed owners decide to withdraw their commitment, i.e., not sell their shares to the Grand Bidco consortium that submitted the lower bid, Purmo’s bid saga may end up in a stalemate. In this case, the relevant issue will become the patience of Haier who submitted the higher bid to wait. However, if Haier’s bid would not materialize for one reason or another, we consider it likely that Grand Bidco’s bid is completed. Thus, we do not see any reason for accepting the bid recommended by the Board of Directors, but believe that the investor should wait for the possible completion of the higher bid, because we feel the expected return arising from the difference between the two bids provides sufficient compensation for the risk associated with the longer time frame.

The Board of Directors will assess the situation at regular intervals and if there is a willingness among the shareholders to accept Haier’s higher offer, it will reconsider its recommendation. The offer period for Grand Bidco that submitted the lower bid is valid until 4:00 pm EEST on July 31, 2024.