Orion urges shareholders to reject Toy Telco bid

ASX-listed Orion Telecommunications has unanimously urged its shareholders to reject the hostile takeover bid of Toy Telco.

Orion, which also trades under the Southern Cross Telecommunications Holdings name, received notification of Toy’s bid on 1 September. Toy Telco is a wholly owned subsidiary of Lewis Securities.

In a letter to shareholders, executive chairman Amanda Lacaze said an independent assessment by Lonergan Edwards & Associates had found Toy’s offer was neither “fair nor reasonable” and “opportunistically timed.”

Toy Telco is offering $0.23 per share whereas Orion’s commissioned assessment values the company’s shares at between $0.279 and $0.30.

This represented a consideration 21 percent below the mid-point fair value range of $0.29 per share, Orion said in its Target’s Statement.

The statement also claims the offer is timed to take advantage of the significant fall in the Orion share price since 30 September 2005 following earnings forecast revisions and litigation issues under the previous board and management.

The current executive chairman Lacaze and management team was appointed in March and May this year.

The current management team also claims to have introduced a number strategies to improve the profitability of the business including the creation of a single bill, the sell off of its loss-making Spanish business, broadening the product range of the Australian and Irish businesses and cross selling and cost reduction programs.

In its 30 June 2006 financial report, Orion said its revenue during the year increased to $80.952 million with a gross margin of $27.905 million.

The company reported a net loss after tax of $2.490 million includes amortisation of initial acquired intangibles of $1.858 million and a write down of the carrying value of goodwill relating to the Australian business of $2.5 million.

Excluding these two items the profit after tax result is $1.868 million.

Orion shares were trading at $0.230 bid and $0.235 offer as at 12:00pm today.

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