Records-management company Recall Holdings Ltd. on Monday, Dec. 15, rejected Boston, Mass-based Iron Mountain Inc.'s (IRM) A$2.2 billion ($1.8 billion) cash-and-share offer as too low and invited the bidder to up its price.
Recall, which is listed in Sydney and headquartered in Atlanta, said the bid valued its shares at A$7.00 each, including A$1.27 of cash and A$5.73 of Iron Mountain stock at a ratio that had yet to be fixed.
The offer represented a slim 9.4% premium to Recall's Friday closing price, and became a discount to the prevailing price on Monday as investors bid Recall shares up 15.3% to A$7.38.
Recall said that it recognized the benefits of the transaction, but bemoaned that too few of those benefits would be passed on to its shareholders at the current offer price.
A combination of Recall and Iron Mountain would deliver about $250 million of synergies and create about $3.9 billion of additional market value based on past deals, the target said.
"The premium over Recall's ... trading price represents less than 5% of the potential combined value creation, which creating value for Iron Mountain equivalent to 49% of its current market capitalization," it added.
Recall also claimed that the premium of 9.4% was too small for a takeover, though it noted that the bid was a 39% premium to its share price on Sept. 29, the day before rumors of an offer first emerged.
Recall was spun out of Brambles Ltd., the world's largest supplier of wooden pallets, in December 2013, after its parent pulled the company from the auction block when bids from industry and private equity failed to meet its valuation of about $2 billion. The company's shares have risen about 40% since its listing, driven higher by management forecasts of double-digit earnings growth and speculation that it would be a target in a sector that is consolidating.