* Group Five says $120 mln offer undervalues assets
* Has until Oct.20 to accept offer
* Greenbay looking to strengthen European portfolio
* Group Five shares leap nearly 43 pct (Adds details, Greenbay comment)
By Nqobile Dludla and Ed Stoddard
JOHANNESBURG, Oct 16 (Reuters) - South African construction firm Group Five said a 1.6 billion rand ($120 million) offer from Greenbay Properties undervalued its European assets compared with possible rival bids.
Such a deal would strengthen Greenbay’s infrastructure portfolio in Europe, where the South African company has investments in offshore wind firm DONG Energy, Spain’s Enagas and toll road operator Abertis .
Group Five’s share price leapt nearly 43 percent on the approach, before paring gains to trade 25 percent higher at 11.59 rand at 1430 GMT.
“We believe this offer substantially undervalues the target assets in relation to other expressions of interest received,” Group Five’s chairperson Nonyameko Mandindi said in a statement.
“The independent board will consider the merits of the offer and respond to Greenbay once the independent board has determined what course of action is in the best interests of Group Five’s shareholders.”
Group Five, which swung to an annual loss in August, said 10 days ago that it continued to receive new expressions of interest from “credible parties” on various assets and businesses within the group.
The cash offer would strip out Group Five’s best performing assets and leave it with its loss-making Engineering and Construction business and its manufacturing arm. Garth Arenz, an analyst at Avior Capital Markets, believes the amount offered “is fair and above the current fair value reflected by management in the financial statements.”
“Although the concession assets can be described as the ‘crown jewel’ of the business with it being so profitable and low risk, it will realise a significant sum of cash that will undoubtedly assist with the turnaround of the construction business and reduce the complexity of the business,” Arenz said.
Group Five’s European assets comprise of road concessions under the Intertoll brand, which it jointly owns with Aberdeen Infrastructure Funds (AIF), and operations and maintenance contracts in toll motorways.
The firm and AIF are in a five-year lock-in period, which according to Arenz “could complicate or invalidate this offer.”
As part of the offer, Greenbay would purchase Group Five’s shares in and claims against the European assets and businesses.
“The target assets are consistent with Greenbay’s investment policy,” the company said in a statement.
The offer was 60 percent more than the company’s market capitalisation of around 1 billion rand, suggesting its assets in South Africa, where the economy is barely growing, are not highly rated.
Group Five said Greenbay approached the firm on Friday and it has only until Oct.20 to accept the offer, which will lapse if it is not accepted by that date.
The offer comes months after it emerged during an extraordinary general meeting that its largest shareholder Allan Gray was pushing for a spin off or sale of the group’s investments and concessions business in Europe. ($1 = 13.3047 rand) (Reporting by Ed Stoddard; Editing by Mark Potter and Keith Weir)