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SPD appear to have valued the offer on the basis just of the ordinary shares in issue (86m shares x £1.61/share = £139.2m).
But if the interpretation in my previous post is correct, they would also have to buy the 8.3m ordinary shares created by conversion of the convertibles wouldn't they? Which would raise the value to £152.6m.
And the increased cost for them of implementing the offer is even greater, since they already have 37% of the current ordinary shares. So the cost of the remaining 63% becomes £101m instead of £88m, if my interpretation and calculations are correct.
It looks to me as though the SPD offer may have triggered a roughly 10% dilution by converting the convertibles into ordinary shares. So everything else being equal, that probably merits a 10% fall in the share price from "fair value" before the offer?
"The following rights are attached to convertible shares:
• The shares may be converted into 8,343,935 ordinary shares at the option of the holders of the convertible share in the event that:
(i) the Company’s volume weighted average ordinary share price rises above 479.4p for a period of one month during the period commencing on 22 March 2013 and ending on 22 March 2021;
(ii) an offer is made for the Company (regardless of the share performance of the Company)."
So that is a total of thirteen holders with more than one per cent including SPD who hold a total of 91.42 per cent. The last RNS is something I am not familiar with. Nat West Markets hold 30,451,618 (18.34%) 23.97 pence convertible shares. What are these shares and how much control does this give them ?
I drew the same conclusion 1GW and bought yesterday.
Lets hope we are right.
I would like to see the SP higher as an indication that the market agrees although I suspect this will only happen once the offer document is published. I don't believe this takeover would have been MA's immediate plan but owing to the opportunistic purchase from Equity his advisors will be trying to cobble together some sort of a case for it ably assisted by the inside knowledge gained from Liam Rowleys presence at Board meetings. I also suspect there will be quite a number of buyout firms running the slide rule under us and very quickly realising just how cheap the company is at these levels so expect to see some interest being shown from these quarters.
I've bought some more. Seems like a crazy price to me given the clear interest of SPD in the company and the huge institutional base. I suspect the price was dragged down to some extent by knowledge or fears of the City Financial need/desire to sell, although I don't understand why someone other than SPD didn't snap them up given the apparently good trading position the company finds itself in.
The SPD mandatory offer isn't really a put option here because I don't think they will get to the required level of acceptances and so won't be required to buy any under the offer. But the fact that they bought at 161p to me clearly indicates a desire for control, which ultimately I think they will end up having to purchase at a premium.
Apologies 1GW_, my mistake, just read your post again.
Skindle - City Financial in Enteq, not Toscafund.
I hadn’t read about Toscafunds involvement with NTQ. I was aware of their involvement with SDY however. Similarly very active here also. They tried to bully the founding chairman off the board which he resisted but managed to have David Shearer appointed to the board as a NED. Then they just sold their twenty per cent holding over night much as they did with FDL.
Given what we know, what do you think fair value for the business is ? What will our board have in mind as an acceptable price ?
Skindle - for City Financial I suggest you google what's happening with them, if you want to see why they might have sold. They also sold out of NTQ, one of my other investments, taking a big hit on the published bid/offer.
As for Toscafund, I don't know - that surprised me as well, given I thought they were probably instrumental in bringing in SPD in the first place and setting this up for SPD eventually to pay a premium for control.
Should we present a nice clean set of accounts for 2018/19 with a PBT of £28m as suggested, this will result in EPS of around 32 pence and a P/E ratio of 5.3 at current levels.
Two unanswered questions, why did City Financial Investment Company Limited sell their shares at such a low price and why did Toscafund decide to call it a day before Christmas ? Are they both unhappy with the way the business is being run or do they know something that we don’t ?
After the mandatory (derisory) offer was announced on Monday I had expected the price to jump back up above 200 pence as it did when Sports Direct first declared its interest in the business in 2015 (?). Just prior to their entry the price had been falling as inexplicably before bouncing back up with the announcement that Toscafund and Schroders has both agreed to sell part of their holdings to Sports Direct.
Also interesting to note and easy to miss that Mr Caldwell made another purchase just an hour and forty five minutes before the derisory offer was announced. This is a man who knows more about our business than most. I take comfort from this.
Henderson has declared, so this is not the same holding as Lombard Odier, while BAML has, not completely unexpectedly, turned out not to have a notifiable interest any more.
So at the end of Day 2, my spreadsheet shows 89% of holdings accounted for, with R&M and Aberforth still not declared.
I don't think I've ever tracked such a good first day of 8.3's. By my calculations we have around 85% of the shares accounted for by today's declarations (I'm including SPD in that). And we haven't yet had declarations from Aberforth, or R&M. I guess that Henderson might now be declaring as Lombard Odier (AlphaGen) and I wait to see if BAML declares separately (or if somehow it's holding effectively as a nominee for someone else who has declared).
Thank you for your last two posts 1GW.
Google performance of this fund and it appears they've had a very difficult year. Findel appears to have been their second biggest holding at the end of January. So perhaps just desperate to raise cash and Findel had to go. SPD in the right place at the right time.
The 50% is a condition of the mandatory offer. They have to accept shares tendered to them provided that they get more than 50% (including the shares they already have) as I understand it. But I think they need to get to 75% to delist and much higher before there is any question of compulsory purchase of remaining shares.
I would be surprised if they get any significant number of shares tendered, provided that Findel come out with a decent defence document and don't own up to something that then makes sense of the 161p share price.
But equally I would be surprised if SPD expect to get many shares tendered. I think they see this as akin to a "dawn raid" and probably much cheaper. i.e. as a pre-cursor to a "proper" takeover offer this allows them to scoop up a significant number of shares at what looks like a very reasonable price, instead of having to pay a premium in a takeover offer.
If they end up with their current 37% of the shares after the offer (i.e. they don't get to the 50% which requires them to take any shares tendered) I think they will be happy. They will be in a position to exert significant influence over the direction of the company and it will be difficult for anyone else to try to take over the company without SPD's agreement. If they do subsequently want to launch a "proper" takeover then it will be less expensive to the extent they then have to pay more than 161p for the remaining shares.
The 50% threshold is what is giving me greatest cause for concern. With the additional 6,000,000 he picked up on the cheap from City Financial Absolute Equity Fund to take his holding to 36.8%, he doesn't appear to have to do too much to get this over the line unless I am missing something?
I have to ask, what forces were at play to enable the SP to get to this level and allow this to happen? It doesn't smell, it absolutely stinks.
Obviously it's a mandatory offer going over the 29.9% limit - I presume if SPD fail to secure 50% of the share issue then the company remains listed and they have to wait six months to make another bid? TBH it's hard not to see SPD reaching the 50% threshold - agree the offer isn't enough
I would echo everything you say 1GW.
I cant help feeling that we have been completely played to get to this point. At least The Board have been buying at higher levels so a swift response to state that the offer significantly undervalues the business shouldn't be too far off...
MA only buys when he can get away with paying peanuts, so I really hope this offer will be seen for what it is and rejected by the remaining shareholders. Unlike everything else he has taken control of, Findel is demonstrably in good shape and has excellent future prospects, which is why we are all here and invested accordingly. It will be interesting to see if he is playing a game of corporate poker and there are other suitors out there.
We were at £3.12 a share,they are trying to get us on the cheap,not a chance.
Funny how the takeover code sometimes works. I am still surprised that any existing shareholder would be prepared to sell out at 161p. I suppose spd saw it as an opportunity too good to refuse, even at the cost of having to launch this offer. But perhaps it does just reinforce their desire to get proper control. So over to the board now to come up with a defence document and decide how to play this. I presume their initial response will be to reject out of hand. But then do they want to engage at a "sensible" price, seek a white knight, or tough it out and attempt to stop spd exerting undue influence? Interesting times. How did it come to this?
Quite bizarre.
1GW, I felt concerned enough to send the below email to Tulchan yesterday afternoon and have not had a reply as yet. If I get one, I will share it with you.
FAO: Catherine James & Will Smith
Good afternoon to you both.
We have not previously communicated, however, I hold a significant personal shareholding in Findel Plc and am writing to you in your capacity of being their appointed Institutional Advisor.
I am sure I don’t need to draw your attention to the current share price which has now fallen by over 40% since the summer of 2018 despite what appears to be a strong set of recent figures reported to the market on 25th January with guidance towards the upper end of market expectations for FY2018/19. Additionally, I can only applaud the members of the Board that have bought shares to support their belief in the future direction of the company and feel reassured on one front, that our investments are aligned.
Whilst I fully appreciate the constraints of releasing market sensitive information, I would be grateful for your comment as to the interpretation of the current share price and specifically, assuming agreement by the Board that the market is wrong in ascribing its valuation, what action is intended to counter the current disconnection, for example, would the Board consider issuing an RNS to state that they know of no reason for the recent weakness in the company’s fall in share price and reiterate guidance for the full year?
I look forward to hearing from you with your feedback.
Kind regards
Is there something we're not aware of do you think?
The diminution in the value of the Findel share price as orchestrated by the market makers.
Well done Mr Caldwell, this confirms that there is nothing untoward inside the business.