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Redflex Shareholders Reject Buyout Offer
Ousted Redflex chairman sinks traffic camera company takeover bid from Macquarie Bank.

Chris Cooper
Australian investors in the photo enforcement firm Redflex Traffic Systems voted down a buyout offer from toll road giant Macquarie Bank and the asset management firm Carlyle Group at a general meeting in Melbourne today. The recently sweetened deal would have paid A$2.75 per share, or $305 million total, to take over the speed camera and red light camera business.

"Your directors unanimously recommend that shareholders vote in favor of the improved scheme proposal, in the absence of a superior proposal," Redflex Chairman Max Findlay told assembled shareholders. "I can confirm that no superior proposal has been received."

Redflex management had spent more than three years trying to sell the company. The process involved approaching over forty potential buyers, with none exceeding Macquarie's bid. Once rumors of the potential buyout began circulating in June, the stock soared from $1.53 per share to its current level of $2.61 on the hopes of a quick cash-in. With the deal off the table, share prices are likely to plunge once the Australian Securities Exchange lifts the trading halt.

Approval of the deal required the assent of 75 percent of shareholders, but the motion only received 63.4 percent support. The deal fell through by almost exactly the 11.1 percent directly controlled by former Redflex Chairman Chris Cooper and his wife. The move is a major financial blow to the large investment firms Thorney Holdings Ltd, Hunter Hall and Renaissance which control a significant portion of Redflex stock. In November 2009, these firms forced Cooper to resign, saying Cooper was not "appropriately qualified, experienced and competent to manage Redflex's affairs."

Cooper's revenge also will cost Redflex executives millions in payouts they would have received had the deal gone through. Cooper has long believed the long-term worth of Redflex was far greater than the amount on offer from companies like Macquarie.

As Redflex does much of its business in the United States, that long-term value is an open question. So far, fifteen states have banned automated ticketing machines. Redflex also faces significant assaults on its largest market, California, in the form of an anti-camera voter initiatives, appellate courts throughout the state finding red light camera ticket evidence inadmissible and a growing number of cities deciding to drop red light cameras entirely. These include Loma Linda and Whittier, Moreno Valley, San Carlos, Union City, Yucaipa and Costa Mesa. In November 2010, 73 percent of Anaheim residents voted to ban cameras. Cupertino, Compton, El Monte, Fairfield, Fresno, Fullerton, Indian Wells, Irvine, Maywood, Montclair, Paramount, Rancho Cucamonga, Redlands, Roseville, San Jose (photo radar), Santa Fe Springs, Santa Maria, Santa Rosa, and Upland have rejected their automated ticketing programs.

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