8/17/2010Redflex Demands More Cash From Toll Road Firm Macquarie
Red light camera firm holds out for more cash in buyout bid from toll road giant.
Redflex Traffic Systems of today reported to the Australian Securities Exchange that it had rebuffed the $275 million offer from toll road giant Macquarie Bank for outright control of the company. The Australian red light camera maker believes that it can spark a bidding war to drive up the purchase price and enrich shareholders.
"Based on an assessment of relevant factors, including the standalone prospects of the business, the board has determined that Macquarie Group Limited's indicative, non-binding and confidential proposal... significantly undervalues Redflex," a company press release explained. "Accordingly, the board has decided that the interests of shareholders will be best served by commencing discussions with a number of parties to determine their interest in making an acquisition proposal for Redflex on acceptable terms. A formal process, including the entry into appropriate confidentiality arrangements with interested parties, will be undertaken to determine whether a change of control offer can be secured at a price and on terms that the Board would recommend. Macquarie will be invited to participate in that process."
Macquarie earns a great deal of its revenue by buying public roads and charging motorists a fee to drive on them. The firm saw enough promise in the automated ticketing market that it gobbled up nearly eleven percent of Redflex stock. Former Redflex Chairman Christopher Cooper and his wife collectively own more than eleven percent of the company. While the firm remains profitable, its margins continue to narrow as groups like CameraFraud.com and the National Motorists Association have taught drivers that in states like Arizona and Virginia, mailed Redflex tickets can be thrown away. As the practice spread, Redflex lost $8 million.
Redflex also faces a $3 million lawsuit from the city of Minneapolis, Minnesota which wants the money back that it had refunded in light of losing a state supreme court decision on the constitutionality of red light cameras (view decision). An appellate decision in Orange County, California struck down red light camera evidence as inadmissible hearsay in a published decision (read decision). Dozens of cities have also dumped the use of Redflex cameras in light of the legal challenges and the lack of revenue generated. The greatest legal risk to Redflex, however, comes from its having admitted in a trial brought by rival American Traffic Solutions that all of its radar units were illegally imported and used for more than a decade.
Redflex stock now stands at $2.45, just five cents below the Macquarie offer price.