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Mercantile OFM, a subsidiary of Mercantile Investment Company (ASX: MVT), has launched an off-market takeover bid for wealth management company Yellow Brick Road (ASX: YBR) at a cash price of $0.09 per share.
The unsolicited offer represents a 3.2 per cent discount to YBR's most recent closing price of $0.093 and YBR executive chairman Mark Bouris says it would short-change shareholders if accepted.
"The takeover bid is unsolicited and, in the view of the board of directors of YBR, it materially undervalues the existing and future value of the company and is opportunistic in its nature, timing and pricing," says Bouris.
While the offer is not subject to shareholder approval in a general meeting, it will allow all YBR shareholders to offload their assets and make way for Mercantile OFM to maintain more than a 50.1 per cent stake of YBR shares on offer.
Mercantile OFM doesn't currently hold an interest in YBR, however its parent company holds a voting power in YBR of 19.97 per cent.
The looming bidder says there are risks to not accepting its offer, including that YBR's performance has been poor in the past and this may be indicative of its financial future.
"If you do not accept the offer you will continue to be exposed to the risks of being a YBR shareholder," says the company in a statement to the ASX.
"Mercantile OFM considers that, whilst past performance is no guarantee of future returns, YBR's historically poor financial and share price performance may indicate such performance may continue into the future without changes at YBR.
"YBR has accumulated losses of $38.5 million as at 31 December 2017. The YBR share price has fallen by more than 84 per cent in the past five years."
Bouris and the YBR board have advised shareholders to take no action until an official considered response has been made.
"A fully considered recommendation by YBR's board, along with the company's target statement, will be provided to YBR shareholders in due course," says Bouris.
"In the meantime, the YBR Directors advise YBR shareholders not to take any action whatsoever regarding their YBR shares in response to the takeover bid."
The offer will remain open for at least one calendar month, giving shareholders time to decide in respect to the takeover bid.
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