The takeover bid of Charlie’s by Japanese company Asahi is an example of a how a back door listing can sometimes work. The original listed company that eventually became Charlie’s was Spectrum Resources which listed on the NZX in 1983. As its name suggests it was originally involved in mineral exploration but divested its mineral activities in 1999 to focus on e-commerce and information technology. This new direction was also eventually divested in 2005.
Spectrum acquired Charlie’s in July 2006 and changed its name to Charlie’s. The purchase price was $11.7m in the form of 145.7 million shares at 8 cents each. This meant original Spectrum shareholders had 17.4% of the company with Charlie’s shareholders ending up with 82.6%. Phoneix Organics Group was then acquired for $10m cash in late 2005.
So it has been a long and winding road for long suffering Spectrum shareholders but the patience of any original shareholders still left has certainly been rewarded!
For the original Charlie’s investors it seems an exit strategy was always part of the plan. This is a pity as all too often New Zealand companies get to a certain stage and then don’t “kick on” to become a multi-national company. Asahi clearly sees real future potential growth for Charlie’s outside of New Zealand but the Charlie’s founders have decided not to realise that while they are owners of the company.
So this story is a two edged sword for the NZX. It typically frowns on back door listings but this one has worked well and the visibility of being listed has certainly helped Charlie’s shareholders extract what looks to be a very full price from Asahi. On the other hand such deals reinforce a trend of smaller entrepreneurial companies listed on the NZX looking to sell out completely rather than develop to be a large listed company with a New Zealand shareholder base.
Anthony Quirk, AFA
Disclosure of interest: Milford is a holder of Charlie’s shares through the Milford Aggressive Fund