Hellaby : Releases Target Company Statement

Hellaby Releases Target Company Statement

News Release:1 November 2016

Independent Adviser Values Hellaby Shares in a $3.60 to $4.12 Range

Independent Directors Recommend Shareholders REJECT Bapcor's Offer

Hellaby Holdings Limited (NZX: HBY) advises that its Independent Directors unanimously recommend that shareholders REJECT the Bapcor Takeover Offer made on 21 October 2016.

The reasons for the recommendation are set out in full in the Target Company Statement, which incorporates the Independent Adviser's Report prepared by Grant Samuel & Associates Limited, and accompanies this announcement.

Bapcor's Offer of $3.30 for each Hellaby share is significantly below the Independent Adviser's valuation range of $3.60 to $4.12 per share and below the Independent Directors' own view of fair value.

The Independent Directors believe the Offer Price fails to reflect the full value of Hellaby and, in particular, its Automotive Group. The Independent Directors believe the Automotive Group has a stand-alone value of at least $350 million, excluding the significant synergies and other benefits that would be gained by Bapcor from a merger of the two businesses.

In addition, the Independent Directors believe the Offer price does not fully value Hellaby's other Groups, Resource Services and Footwear, or reflect the considerable opportunity for future profitable growth under Hellaby's recently communicated Group strategy.

In forming their recommendation to REJECT the Offer, the Independent Directors have had regard to a number of factors including the merits analysis in the Independent Adviser's Report, the assumptions and other matters addressed in detail in the Target Company Statement.

The Target Company Statement is available on the Hellaby website at www.hellabyholdings.co.nz. The printing and mailing process is underway and printed documents will be dispatched to shareholders on 4 November 2016.

FY 2017 Financial Outlook

Included in the Target Company Statement are Board approved full year FY 2017 earnings forecasts for each of Hellaby's continuing business groups - Automotive, Resource Services and Footwear. These forecasts have been used by the Independent Adviser as part of its valuation analysis.

While Hellaby's Directors are not in a position to provide detailed guidance for the Group, the FY 2017 trading profit (excluding the gain on Equipment Group sale and the abnormal Footwear Group restructuring costs) is forecast to be significantly ahead of the FY 2016 year.

The Board has also provided additional earnings guidance for the Automotive Group, with Trading EBITDA forecast to grow from $26.8 million in FY 2016 to $31.1 million in FY 2017 and up to $35-$40 million in FY 2018 (a compound annual growth rate of 14% to 22%).

First Half FY 2017

Hellaby's Net Profit After Tax for the first half of FY 2017 to 31 December 2016 will include a transactional gain of around $30m from the recent sale of the Equipment Group.

Earnings results for the first half of FY 2017 compared to the FY 2016 first half period will reflect:

• Full period earnings from Premier Auto Trade (acquired 1 May 2016) and TBS Group (acquired 1 July 2016);
• Discontinuation of contributions following the sale of the Equipment Group on 30 September 2016, which means there is only three months of earnings from this Group in the FY 2017 half year period;
• The abnormal costs associated with implementation of the restructure and redundancy programme in the Footwear Group; and
• Continuing soft market conditions and trading for Contract Resources, with initiatives underway to improve performance.

There is no benefit in accepting early

Hellaby is aware that Bapcor representatives are canvassing Hellaby shareholders in connection with its Takeover Offer. The Independent Directors strongly recommend that shareholders wait to receive, and then carefully read and consider, the Target Company Statement including the Independent Adviser's Report, before making a decision.

Shareholders are encouraged to seek professional independent and qualified financial advice if they are in doubt as to how to respond.

Consistent with the Independent Directors' recommendation, all of Hellaby's directors and senior management intend to REJECT Bapcor's Offer in respect of all of the Hellaby shares that they hold or control.

As the Offer must remain open until at least 20 December 2016, there is no advantage in early acceptance and in fact there are significant potential disadvantages if accepted early.

The Independent Directors reiterate their recommendation that shareholders REJECT Bapcor's Offer and recommend that all shareholders read the Target Company Statement including the Independent Adviser's Report which accompanies this announcement.

For further information please contact

Alan Clarke
Managing Director & Chief Executive Officer
T [phone]
M [phone]
E [e-mail]

Steve Smith
Chairman
M [phone]

Hellaby Target Company Statement Cover Letter 1 November 2016

Hellaby Target Company Statement 1 November 2016