Agree with your post... the majority of investors in at over 1 pound per share and higher will not stomach a takeover offer for much less than 90p per share 100m MC...AVN shares are now not priced for a strategic investment though, as they would probably want to raise 50m or more... AVN's assets and current / possible future earnings (even with the bond issues looming) are currently undervalued for me in SP terms by around 50p.... its going to be interesting to see how the mm's deal with the SP here because an issue of share at around that level is very possible... Currently the SP is being suppressed...for whatever reason.... I have mentioned in previous posts that just one major deal makes a total game changer here... Well undervalued!!
Some very interesting and knowledgeable posts coming out from you guys today. Something to think about over the weekend. When I first invested here there was talk of this being the in the FTSE 350 and maybe 250 indices, plus the sp was going to reach over 2000p. I am probably one of many that consider something positive is going to come out of all this situation and in a year or two the companies fortunes will have turned around. Interesting that the big investors with pension funds attached together with big clients are still here which gives confidence that something positive welcome out in the end.
Back in the 1990s I had clients who through no fault or motive of their own would have acquired over 30% of an FTSE 250 Listed company. It was not what they desired but on enquiry the LSE was adamant that a mandatory bid would be required. I see no difference in this case other tan it is an AIM listed company involved. If somebody acquires in excess of 29.99% they should under the rules be required to make a mandatory bid at the maximum price they have paid for shares whether as a result of the deal or in the market... that gives shareholders an opportunity to bail out on the best terms offered in the market. We had to find an alternative that avoided this and we were successful in doing so.
Resolution 3 could not only let AVN issue shares to a new third party investor (in exchange for cash or assets - assets could for instance be Permira's ABS), it could also allow to convert an unspecified amount of bonds into common equity, creating at most 33% dilution to current shareholders. But at the same time it would reduce the interest cost (given part of the debt would be erased), which is accretive. However resolution 3 also says : "The Directors do not have any present intention of exercising the authorities conferred by resolution 3 but they consider it desirable that the specified amount of authorised but unissued share capital is available for issue so that they can more readily take advantage of possible opportunities."
So resolution 3 could be part of a debt restructuring that dilutes current shareholders 33.33% at most. Resolution 4 could dilute shareholders another 10%. Together it means that a debt restructuring would not dilute current shareholders by more than 43.33%.
That would be not ideal but would still provide a whole lot of upside to the current share price.
Not sure a mandatory bid gets triggered when a company obtains new shares in an operation that helps fix the liquidity. In Germany for instance you can cross the 30% mandatory bid level and be exempt from having to follow up with a mandatory bid if you cross the threshold by subscribing to a rights issue.
On AIM rules and potential suspension: note that it is up to the exchange to take that decision and that the exchange can decide not to suspend trading if it is satisfied. I am not too familiar with the aim rules but I can imagine that the exchange would provide an exception here given that AVN is operating under Rule 2.6 of the Takeover Code.
Also, it is quite clear now that the M&A route dominates the timetable here. Otherwise we would have had the debt restructuring a few months ago already.
And another thought on the maximum 43.33% dilution from Resolutions 3 and 4: 43% of the shares at current market value is really not going to make a material difference in reducing the overall debt. So it probably means that the worst case scenario of a severe debt for equity swap will be avoided. If you take the 280 price target from before this all happened and dilute it with the worst case 43.33% dilution then the share price should now in theory trade around 195 (= 280 / 1.4333). Could it be that this is our worst case downside scenario?
On another note, we are not only waiting for the annual accounts, but also for the previous quarter trading update...
And yet another thought: should we indeed see the M&A route prevail and for instance see a reverse takeover between AVN and Permira's ABS, then the combined company (without the current AVN liquidity issues) should have a market cap large enough to include the company in the FTSE 350 and maybe 250 indices, which should create a lot of buying pressure on the stock from
I agree with doubleU that there is a problem: the BoD is poised between Scylla and Charybdis. If they hold back they are personally exposed to Companies Act penalties (which may include disqualification as a director of any company not just AVN) but if they go ahead it may not get the best deal for shareholders so they are trying to hold the line. They can talk to Companies House about the filing deadline but on the basis that the date on the CH site hasn't changed if they have it has been rejected.
On what little evidence we have I expect that: 1) Accounts will be filed on or before 31/12 2) Accounts 2016 and Q1 2017 will be made available to bond holders and by extension to UK shareholders on or before 31/13 3) At the AGM on 29/12 the BoD will at very least sketch out what they propose is to happen 4) There will be an EGM in February to approve and implement any deal/injection of capital
The bright side in the meantime is that AVN is still winning business with quality customers.
So yes I think doubleU is right in saying that the deal may be "subject to" the issue of shares being approved on 29/12 and that the auditors have already approved in principle that they will sign off unqualified accounts if the share issue is approved. I suspect that the deal is for a capital injection rather than a bid as that raises too may obstacles to a quick resolution and anything else would rule out a bid from FB or any other third party. If it is a capital injection the dilutive effect is I think limited to 29.99% as my understanding is that anyone with more than that would have to make a mandatory bid for the rest of the shares at the same price as the underlying transaction.
The problem is perhaps stemming from the majority shareholders being in above 200p. They may not be in a position of write off their investment and take an offer well below their average entry price which makes the probability of an acquisition even lower.
I also can't see a third party putting in an offer above 200p mark which leaves only one option for the company to stay afloat- an equity injection.
The AIM rules are quite clear about the company's obligation to publish the accounts no later than 6 months from the year end date so 31th December is the absolute deadline (which is a saturday so it has to be on the 30th)- after which the shares will be suspended. Anyone with a different view or aware of exceptions to this rule?
If the assumption above is correct, then there is a chance the board has a party lined up and will use the vote on the 29th to gain authority to issue 30% more shares. The deal has to go overnight for them to get the auditors to sign the accounts as a going concern and get the accounts published on the 30th. Thoughts?
I think you need to review the list of key investors (both bonds & equity) - there are not many more active hedge funds than those invested here. I suspect the bigger problem is that everything is in regulatory 'lock down' because of the takeover situation.
I take comfort from the fact that there has been no news - that means there is still activity in the background. Otherwise we would know. Most of these guys came in around the 200p mark and have stayed invested - they have the power to use their debt holding to drive the company under but haven't done so.... To me that is a positive
If I'm correct AVN will change dramatically once news is out.
What this company needs is an activist investor to lobby for pushing out the current incompetent management! I think large IIs (with the exception of a handful) probably see this stock as a punt so Avanti's survival isn't keeping them awake at night!
My investment thesis is based on value of synergies for a 3rd party hasnt changed and that's why Im still holding the stock but i dont have a lot of confidence in the current team's ability to run it. The only glimpse of hope is their experience in financing large telecom investments so which may help dig us out- i think day to day operations of need a completely different skillset
Double U - I wouldn't bother. If you look at the majority of PI's under shareholder analysis 83 per cent of shareholders hold an average of 2,000 shares whilst those with 500,000 plus and likely to be mainly Institutions hold 86 per cent of the market cap although they are only 2.50 per cent of shareholders. They will have been sounded out and expect nothing to prevent a rubber stamping of resolutions. I don't expect any to attend unless they use the occasion for a meeting afterwards. This is standard and I intend to go because I am retired and live in London. I wouldn't make the effort otherwise. Occasionally you discover interesting comments and it does help to meet management and perhaps get a telephone number.
Sweepy suggests the squeezing in at the last minute was forced by AGM requirements whilst the Accounts question is bypassed because of the strategic review. I am fairly relaxed about the accounts as events have made them in some ways irrelevant and KPMG are still with us. New partners or a sale are required and they will do their own auditing. Not sure about the WhiteBlue's latest idea. He has suggested so many that some may well hit the dartboard. Combining two companies struggling in an oversupplied market means sacrifices unless they have a USP. We didn't get picked by Facebook but may be in with a chance of sloppy seconds. I miss GG and Crobe as they brought balance to this board which is for now mainly happy-clappy. From where I sit it is possible to suggest different outcomes but I remain hopeful and a holder.
The delay could be due to all sort of complications but you cannot discount the fact that a meeting over the Christmas period is also a good time bulldoze stuff through with little scrutiny. I'm giving them the benefit of the doubt as obviously negotiations have taken longer than expected and it looks worse than it is. However?
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