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DANL90, you are correct, I got that wrong, hands up.
No that’s incorrect
It wouldn’t stay the same for stagecoach shareholders if they negotiated it up
Easy example. Say the combined business makes £100m profit
Atm as a stagecoach group of shareholders we’d be getting £25m of that in the future
If we negotiate up we’d get move of that in the future
You need to consider the value of the combined group. Which is why your point isn’t correct and why NX price goes too (as the £100m will have synergies to come)
Atm we get 25% of the future pot. If we negotiate more you can see you gain as more cash in future runs to stagecoach shareholder (by the fact you have more NX shares)
Not that simples.
If SGC board negotiate a higher percentage then the NEX share price will fall accordingly and the benefit to SGC shareholders will remain the same.
It is a merger not a takeover.
Yeah there will always be a difference (that the 0.36 NX sits above the stagecoach price) but this reflects the risk the deal doesn’t happen ie leaves a bit for an investor who wants in on the deal but others willing to cash out now
There are a lot of reasons why this deal might not happen. I think with Tories in and levelling up they will champion this as long as assurances are given re depots and services etc
If the SP is more than 0.36 x Nex than I’d sell SGC to buy NEX. Vice versa when SGC is less than 0.36 Nex I’d sell Nex to buy SGC. This should be good profit.
Stop thinking about it in terms of pence and solely think of it in terms of NX shares
The offer is 0.36 NX shares per stagecoach share
When the deal completes you will not get a penny. You will get NX shares
If NX is £4 you get 0.36 NX shares
If NX is £2 you get 0.36 NX shares
All that can happen now is
- stagecoach as for some element in cash or a cash top up (later more common where there is a divi already due)
- stagecoach could argue they are worth more in the combined group so 0.36 goes up
- NX stock falls so the deal isn’t accretive ie there will be a 0.x where the deal is dilutive you NX holders despite the synergies
But think of this only in terms of NX shares
But the offer isn't 80p. It's now 86p and will keep changing as the NEX sp changes. If they negotiate it is the 0.36 that will need to change (or the structure of the deal).
They will have to re calculate the price when they put in a formal offer and giving the price will be higher than 80 pence buy then