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21 November, 2002
Dear Shareholder
Reject Takeover Offer from HGL Limited
You will have by now received documentation pertaining to the unsolicited takeover offer from
HGL Limited ("HGL") to acquire all or part of your shares in Lemarne Corporation Limited
("Company") dated 20 November 2002 ("Offer").
By making the Offer, HGL has clearly identified the strategic significance and substantial
value of your Company. However, your Directors strongly believe that the Offer fails to
adequately compensate you for this value. Consequently, your Directors continue to unanimously
recommend that you take no action and reject the Offer made by HGL. Your Directors will
provide you with detailed reasons for their rejection of the Offer within the next 14 days. In
the meantime, your Board reiterates its belief that:
- the Offer price of $1.70 ("Offer Price") from HGL for your shares is opportunistic
and grossly undervalues your Company.
- your Company is on track to realise significant earnings improvement resulting from
recent restructuring initiatives. The significant restructuring of the Company over the
past 18 months has resulted in significant operating and financial improvements. The Board
and management anticipate further significant operating and financial improvements in the
current financial year.
- your Company may lose the benefit of substantial carried forward Australian tax
losses. At 30 June 2002, the Group had $8.1 million in tax losses which the Board
anticipates being able to utilise this year on the basis that the sale of Richardson Pacific
proceeds. These tax losses will be lost if HGL is successful in acquiring a significant
percentage of the Company’s shares and Richardson Pacific Limited is sold.
- HGL’s Offer Price is set at a substantial discount to historical and forecast
Net Tangible Asset backing ("NTA"). On the basis that the sale of Richardson Pacific
proceeds, the NTA of your Company is forecast by your Board to increase to $2.30 per share,
which includes over $1.55 in cash per share. The HGL Offer Price barely represents the
forecast cash component of the NTA and is 60 cents per share below the forecast NTA.
- Lemarne Corporation’s shares are trading on ASX at a price in excess of the
Offer Price, which reflects the inadequacy of HGL’s Offer. Between 8 November 2002
after the Bidder’s Statement was served on the Company, and yesterday’s date, the
shares in the Company have traded between $1.75 and $1.85.
We strongly recommend that you do not accept the opportunistic Offer of HGL. A more
detailed response to the HGL Offer will be sent to you in the next 14 days.
Yours sincerely
Brian Noxon
Chairman
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