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It’a interesting that it’s felt that the enterprise valve is north of 500m, that suggests debt aside the SP is extremely low at this time. And even with a fund raise, there is still potential of a strong gain from these prices.
GLA
I think you would struggle to buy that volume of shares on the market without sending the price north.
It will be interesting how this plays out.
A premium is unlikely. They would simply buy the shares on the current price rather than pay a premium. At the end of the day, if there is an appetite for the shares, the issue will be successful.
All will be revealed in the next few months. A takeover is unlikely simply because of the debt levels. Enterprise value is well north of £500m.
Hinkley - It seems to me ,that as the equity raise has been expected for months, the current market valuation of each share takes this into account.
I.E its 80p for a share in a company with high debts and it will be 80p for a smaller share of a company with significantly less debt and the unhindered ambition to expand and perform.
If you have had shares for years then the damage is already done and the value lost. If you have purchased in the last year or so, not a bad investment.
I still hope for a placement at a premium to the current level but who knows.
Kind regards
Indeed...but if you are going to the trouble of producing a spreadsheet and sharing the spreadsheet on a Kier BB, you have ignored the most important aspect of the raise which is that it is significantly greater than the current market capitalisation of the company.
On a relative basis, the proposed issue is massive. For every £1 you have invested now, you will have to part with £1.50, just to avoid dilution.
Stinkley...!! Which hat does he put on today...! Steve72 or Hinkley..
You are like an irritating ear-worm, no investment and never an outside recognition of how well the management are turning this around..! Never once have you acknowledged the at least £115m “annualised” cost savings, that’s AT LEAST..! Why the hell do you bother, please just be upfront and reveal your true intentions..?!
and in other news the market is unmoved.
150%
None of these offers was raising 180% additional market capitalisation. They represented significantly less shares being offered than were already issued.
Kier is issuing circa 150% new capital capitalisation.
Thank-you Poleaxe for your insight, I think you've put my thinking on a more realistic track!
To try and get a more concrete feel of how these play out I have been having a bit of a dive into examples of completed equity raises via "firm placing, placing and open offer".
I've been using this google search to find examples:
site:https://www.londonstockexchange.com/news "firm placing, placing and open offer"
and I am adding some key details to a spreadsheet over here:
https://docs.google.com/spreadsheets/d/19U5XG-kkH-TUT-vQj5UcaCB0d723sZMZ4tzwIg-ULnA/edit?usp=sharing
Two of the examples I have found had the open offer the same size of the firm placing and the excess applications for the open offer had to be scaled back.
The third example the Open Offer was much smaller than the Firm Placing but was undersubscribed so everyone who applied for excess shares in the Open Offer got as many as they wanted.
If a placement and rights issue happens, existing shareholders will be diluted unless placement is at or around current share price. That is unlikely to happen.
Would existing shareholders stump up 140p per existing share for new shares? I doubt it.
I think it depends on the pricing. The lower the price, the more of the company the placees stand to acquire for their money. The lower the price, the more existing holders will be disadvantaged if they don't take up the shares (unlike a rights issue the entitlement isn't tradeable).
In order to reduce the dilution existing holders can apply for more than their basic entitlement. How much extra they receive will depend upon how many people don't apply for their minium allocations.
Poleaxe do you think, there will be much appetite for the shares, from the markets
PeterSW, in the results RNS on 21 April they said:-
"The proposed equity raise is expected to be in the range of £190m to £240m and to be undertaken by way of a Firm Placing and Placing and Open Offer."
If that's the case, existing shareholders will not have the opportunity to take up sufficient shares to avoid dilution of their stake in the company. How much they get diluted will depend upon the relative size of the firm placing. If you want to avoid dilution you need a rights issue, but it's likely the company felt shareholders might balk at the prospect of being asked to stump up another 150p per existing share held. Also, they might not have been able to obtain underwriting at a credible rights price.
I've seen these situations before and companies seem to consider they've met pre-emption, provided they have an open offer, even if it is a bit of a token gesture.
Steve, debt for equity implies exchanging debt for shares.
What equity has Kier got to offer, if KL sold with the landbank. They possilbly hold some industrial type property and their current offices, Tempsford hall is still for sale?
Finally, a sensible post! I think the market agrees with you and the dark days of hedge funds shorting this are long gone.
Much2Learn, what makes you think the raise will come from a debt for Equity swap?
Do you see much difference between raising money and paying down debt vs a debt for Equity swap?
My current expectation is that pre-emption rights are not going to be disapplied and existing shareholders will avoid dilution if they take up the full offer and pay their share of the total raise.
If that is the case then for shareholders taking that route the end price shouldn't matter since they will have the same share of the company for the same cost regardless.
I have seen people suggesting that won't be the case. Though why wouldn't they size the open offer to be whatever it needs to be to avoid needing to disapply the pre-emption rights?
I was close to buying in again yesterday; however, I then went and re-read the rights issue prospectus from a few years back - it brings home just how much debt is due for repayment soon ... and most importantly it appears much of it might be due to the same banks who lost so much on underwriting that capital raise (Santander, HSBC, etc).
Aside from a few major shareholders (who also invested last time), the remaining raise seems likely to come from a debt for Equity swap. And so, if you were in HSBC's position of strength would you accept a placement at approx £1-£1.20 (perhaps doubling share capital), when you could likely agree it at 60p (likely tripling/quadrupling shares in issue)?
All that said, even at 4 times the shares in issue if Kier Group can show at £100m annual profit (based on projected figures in the update), then within a couple of years if a third is being distributed, this would likely equate to around a 6-7% dividend. On this basis there might still be a 50%-100% rise from current share price - particularly if those profit estimates are conservative.
Problem right now is that as far as I can see there is an awful lot that could go wrong in two years and little scope for a plan B that does not wipe out existing shareholders.
Just thinking out loud.
He seems to have done the share price no end of good. Nearly doubled since he started posting :)
*allowed*
@damof,
Since kier let him go for being inept at pretty much every thing. He has loads of free time each day, while not playing with his Lego set pretending he’s in construction. He comes on here bitter and twisted about no longer being aloud to play with the real toys.
Steve72, as your not invested and apparently don't intend to, don't you have anywhere else you can go and peddle your utter nonsense. Why are you here???