Saturday, December 23, 2006

CDO - Colorado Group

Colorado Group (ASX:CDO) was recently the subject of a partially successful takeover bid by Affinity Equity Partners (one of a long line of Private Equity deals). The takeover was only partially successful because Solomon Lew emerged at the last minute 10% (blocking) stake in the company. While Affinity control the Colorado Board, Lew's stake prevents Affinity from attaining the 90% ownership required to compulsorily acquire the company.

The Australian Financial Review reported today that Affinity would be able to make another bid for Colorado in March 2007.
Affinity, it is thought, can make a new bid for Colorado from March 16 next year. Market observers are already suggesting Affinity will waste little time in bidding around the $5.20 mark in an attempt to get rid of Lew and get 100% of the company's cash flow.
Given that Colorado closed at $4.00 yesterday, this creates an interesting opportunity. At yesterday's closing price there is a 30% gain available assuming that a bid does in fact arise at $5.20 as suggested.

While this all sounds quite reasonable, the current share price would indicate that investors in the Australian stock market think this is certainly not a sure thing. Still, it's worth considering...

Disclosure: The author does not own shares in Colorado Group.