DuluxGroup Limited (ASX: DLX) has today announced a takeover offer for the 80 per cent of Alesco Corporation Limited (ASX: ALS) that it doesn’t already own. DuluxGroup has offered $2.00 per share, or $188.4m for the construction and building products, garage door and cabinet maker.

DuluxGroup Managing Director Patrick Houlihan said “The offer presented an attractive opportunity for Alesco shareholders to receive a substantial premium for their shares in cash, a stock that is relatively thinly traded, without incurring any brokerage fees. “

Mr Houlihan also stated that is a logical strategic step for DuluxGroup to grow its Australian and New Zealand position, provide new platforms for growth, and increase earnings diversification across end markets and products.

The company also said that the transaction is expected to be earnings accretive in the first full year of ownership – in other words, Alesco’s business will increase DuluxGroup’s earnings per share.

Alesco

Alesco’s shares closed on 30th April 2012 at $1.40, and the shares have soared 43 per cent to $2.00. Alesco has been facing many headwinds over the last five years, with its share price falling from over $14 in 2007. The company reported a small profit of 13.6m in 2011, after two years of losses, and has been selling non-core businesses in recent years. The company had forecast a net profit after tax (before significant items) of around $10m for the 2012 financial year.

DuluxGroup

DuluxGroup was de-merged from Orica Limited (ASX: ORI) in 2010, and owns several notable brands such as British paints, Dulux, Selleys, Hortico, Berger, Yates and Feast Watson. The group has four segments, consisting of Paints Australia, Paints New Zealand, Selleys Yates and Offshore and other. The company reported a net profit after tax of $77.6m for the 2011 financial year, and expects 2012 financial year results to be higher than that (although they didn’t state by how much).

The Foolish bottom line

This looks like a good acquisition for DuluxGroup, with some complementary businesses, and the likelihood of extracting some cost saving synergies. Alesco has been begging for someone to turnaround its businesses for a few years now, and that should accelerate under new management.

However, with little spare cash and net debt of $222m (compared to $138m of shareholders equity), DuluxGroup has been forced to establish new debt facilities of $270m, which will be used to fund the acquisition of Alesco. This significantly increases the risks for investors in DuluxGroup, and it’s something to watch.

The ASX is already on the move in 2012, and Goldman Sachs experts recently said they reckon S&P/ASX 200 could top 5,000 next year. Read This Before The Coming Market Rally is a must-read for investors who don’t want to miss out on the party. Click here now to request your free copy, before it’s too late.

More reading

Motley Fool contributor Mike King doesn’t own shares in any companies mentioned. Take Stock is The Motley Fool Australia’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691).

OUR #1 DIVIDEND PICK FOR 2016...

Forget BHP and Woolworths. This "dirt cheap" company is growing like gangbusters, and trading on a 5.6% dividend yield, FULLY FRANKED (8% gross). With interest rates set to stay at these low levels for years to come, for hungry investors, including SMSFs, this ASX company could be the "holy grail" of dividend plays for 2016.

Enter your email below to discover the name, code and a full investment analysis in our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2016.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.