When an S&P/ASX 200 Index (ASX: XJO) share makes a takeover offer on a small-cap company, the resulting price action can be impressive.
Which is what we’re seeing today after it was revealed that ASX 200 share ALS Ltd (ASX: ALQ) – a global inspection and certification business – made such a takeover bid for HRL Holdings Ltd (ASX: HRL) on 30 May.
HRL, a small-cap laboratory service provider, said negotiations remain under discussion.
What is the ASX 200 share offering?
According to this morning’s release, ALS pitched an unsolicited, non-binding indicative offer to acquire 100% of its smaller rival’s shares for 16 cents cash per share.
That’s a massive premium to yesterday’s closing price of 8.2 cents. And investors took note, driving the HRL share price up to 14 cents, a gain of 70.8% today.
With 494.38 million shares outstanding, the ALS bid values HRL at just over $79 million.
However, the deal isn’t done yet.
HRL stressed that discussions on the takeover offer are “preliminary and incomplete and no agreement has been reached in relation to any transaction”. It said there are no guarantees that the two parties would reach an agreement and that a transaction will eventuate.
HRL said that following the takeover offer from ALS, it entered into a Process Deed on 7 June 2022. This gives the ASX 200 share the opportunity to undertake due diligence and negotiate transaction documentation on an exclusive basis to 20 July 2022.
The Board said shareholders didn’t need to take any action regarding the ALS proposal. Shareholders will be informed of developments.
ALS is being advised by Highbury Partnership and Baker & McKenzie.
McCullough Robertson is acting as the legal adviser for HRL.
How have these 2 companies been tracking?
With today’s huge 71% intraday leap factored in, the HRL share price is up 17% year-to-date.
Investors have responded less enthusiastically to the ASX 200 share making the takeover offer. The ALS share price is down 2% today, putting it down 18% for the calendar year.
By comparison, the ASX 200 is down 11% in 2022.