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Mercantile Investment's takeover offer for Yellow Brick Road nears end

Australia-based wealth management company Yellow Brick Road Holdings Ltd. said it believes Mercantile Investment Co. Ltd.'s takeover offer will not succeed as acceptances of the offer are less than 1% of the company's shares in total as of Oct. 18.

The offer remains subject to its original conditions, including that the bidder acquiring more than 50.1% of Yellow Brick Road's shares by the end of the offer period, which have not been satisfied. If they are not satisfied by the end of the offer period on Oct. 19, all acceptances of Mercantile's offer will become void.

Mercantile Investment unit Mercantile OFM Pty Ltd. in August launched an off-market takeover bid to acquire all shares it does not own in Yellow Brick Road at 9 Australian cents per share, or A$20.3 million in aggregate. Yellow Brick Road's directors had urged shareholders to reject the offer, saying that the offer undervalues the company's shares.

Yellow Brick Road's directors continue to recommend to shareholders to reject Mercantile's offer and do nothing.

Meanwhile, Yellow Brick Road responded to Mercantile's assertions in an Oct. 15 bidders statement that Mercantile is seeking greater influence in Yellow Brick Road in order to facilitate change. Yellow Brick Road pointed out that Mercantile did not identify any of Yellow Brick Road's strategies or operations, or anything else with respect to the company that it wishes to change.

Yellow Brick Road also defended the company's poor financial and share price performance. The directors reiterated that the company is young and growing, and that losses over the years represent the investment necessary to build the company's brand.

It added that the company's recurring revenue and recurring gross profit have also been increasing for the last three years. Further, the company's directors noted that in their view, the share price and trading history does not represent the company's underlying true value.