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Mercantile Investment says takeover offer for Yellow Brick Road is final

Mercantile Investment Co. Ltd. responded to Yellow Brick Road Holdings Ltd.'s board of directors' rejection of its takeover offer, saying its offer is final and will not be extended beyond Oct. 19.

Mercantile Investment unit Mercantile OFM Pty Ltd. had in August launched an off-market takeover bid to acquire the company shares it does not own in Yellow Brick Road at 9 Australian cents per share, or A$20.3 million in the aggregate. Yellow Brick Road's board on Sept. 3 urged shareholders to reject the offer, saying the offer undervalues the company's shares and does not have any control premium typically paid to shareholders in similar transactions.

Mercantile OFM on Oct. 15 responded to Yellow Brick Road's board's rejection of its offer, warning shareholders of the other company that they "are basically being asked to continue to support a strategy that has so far failed to deliver any returns" to shareholders. Yellow Brick Road has a track record of poor financial performance with years of financial losses. Mercantile OFM said its offer to seek greater influence in Yellow Brick Road's strategy will bring about change.

Mercantile OFM also called into question the directors' view of Yellow Brick Road's equity value as the basis for these estimates are not fully explained. Yellow Brick Road directors believe the company's shares are worth more than 38 Australian cents per share but Mercantile OFM pointed out that the shares are currently trading at 11 cents per share, as of the closing price on Oct. 12.