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Asia Distribution Solutions Ltd

  • BY: Andrew Hore |
  • POSTED: 04/09/2008 |

Asia Distribution Solutions Ltd is recommending a bid from Yarraman Winery Inc.

The all share bid values ASDL, which is a distributor of drinks in China, at double its market value the day before the bid was announced. The shares have risen from 22.5p to 30.5p following the news of the bid. That places a value of £9.36m on the company.

That is still below the notional value of the bid based on a Yarraman share price of 42c, which is the price that shareholders converted their loans at the end of June 2008. That values ADSL at $27m (£15m).

The lack of a true market price for Yarraman shares explains the apparent discount to the bid value based on ADSL’s current market price. Yarraman’s shares are listed on the Pink Sheets, US quotation service. It intends to seek a quotation on the US Over The Counter Bulletin Board – hardly a liquid market.

Loss-making Yarraman had net assets of $2.55m at the end of June 2006 according to the bid announcement. It seems strange that there haven’t been any results since then unless this is a mistake in the announcement put out by ADSL’s adviser Evolution.

Yarriman operates a winery in New South Wales, Australia. It intends to buy a further vineyard.

ADSL shareholders are likely to own 62.5% of the enlarged group. ADSL directors Michael Kingshott, Steve Wong and Alan Leung will take over as executive chairman, managing director and finance director of the enlarged group.

The reasoning behind this deal is mystifying and the announcement released by ADSL doesn’t offer much in the way of explanation of the strategy.

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