Polypore sold in $3.2 billion two part deal but legal challenges to sale emerge
Agreement was finalized in February for US battery separator firm Polypore International, to be split into two and sold for $3.2 billion. Asahi Kasei Corporation is to acquire its energy storage business and US-based 3M will acquire its separations media segment.
In the merger agreement, Asahi Kasei Corporation will buy the company for $60.50 per share in cash, through a US subsidiary. The price of the sale agreement has subsequently being challenged by Brodsky & Smith, a US litigation law firm.
Immediately before Asahi Kasei’s acquisition of Polypore, 3M Company will acquire the assets of Polypore’s Separations Media segment for approximately $1 billion and Asahi Kasei will receive the cash proceeds from the asset sale.
“The definitive agreements require that the sale of the company and the integrated sale of the Separations Media segment closing conditions for both transactions have been satisfied and that the closings of the transactions are conditioned upon one another,” said a Polypore statement.
“The per share consideration represents an enterprise value for the company of approximately $3.2 billion and a premium of approximately 24% over the volume weighted average share price for the 10 trading days up to and including February 20.”
On February 25 law firm Brodsky & Smith, LLC announced that it was investigating potential claims against the board of directors of Polypore for what it described as “possible breaches of fiduciary duty and other violations of state law in connection with the sale of the company to Asahi Kasei Corporation.
“The investigation concerns whether the board of Polypore breached their fiduciary duties to stockholders by failing to adequately shop the company before agreeing to enter into this transaction, and whether Asahi is underpaying for Polypore… The transaction may undervalue Polypore and will result in a loss for many long term Polypore shareholders. Polypore stock has traded as high as $72.00 per share.
“Consequently, an analyst has placed a $62.00 per share price target on Polypore stock and it has been reported that an analyst has also indicated that he thinks other bidders may be willing to top the price being paid by Asahi. However, the deal has a $39 million breakup fee which could hinder a topping offer from being received. “The transactions have been approved by the boards of directors of Asahi Kasei, 3M, and Polypore, and are subject to the customary regulatory and Polypore shareholder approvals.
“The combination of our energy storage business with Asahi Kasei and our separations media business with 3M are excellent strategic fits, which we believe create value for our people, customers and shareholders,” said Robert Toth, Polypore’s president.
“When you combine our technology, process capabilities, and material science expertise with their technology, global reach and broader resources, there’s a great opportunity to accelerate growth going forward.
“Clearly, our people have done a tremendous job in building strong businesses that are positioned to address exciting global market trends and needs over the long term, and have the potential to achieve a new level of success by playing a major role in the future growth of two leading global technology companies.”
Analysts view on the sale has been mixed, however. “For long time investors in Polypore, the buyout will end what has been a tough time for the company,” said one commentator. “After soaring in 2011, the stock hasn’t done much since, and despite increasing interest in electric vehicles, Polypore hasn’t seen the growth that investors had hoped to see, and this quarter’s results make it hard for investors to feel bad about taking a buyout bid.
“Still, Polypore didn’t live up to its full potential, and while Asahi might have better luck tapping the potential of Polypore’s energy storage business, that success will come as little comfort for those who ended up not profiting from their Polypore holdings in the end.”