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Great RNS
- significant value recognition
- ability to continue to hold in sector as an rtw holder, rather than selling and having to deploy
So we're getting 143p for each share when our NAV is 180p? That's still a substantial discount.
RTW Biotech appears to be trading on a discount of 28% so for those happy to continue to hold until the market improves the deal doesn't look too bad.
Anyone looking to exit now are likely to be short changed IMHO.
Need to do the Maths outside work - why havent we seen a larger rise this morning or are we getting this wrong ?
Current RTW sell price is $1.06 = 87.3p
x 1.4633 = 128p
But Acacia get to sell theirs for 143p cash.
Hmmmmm...
Arix Bid now 118p.
Mr Market saying this deal ain't happening?
Stockopedia commenters aren't happy either:
https://www.stockopedia.com/content/small-cap-value-report-wed-1-november-2023-spe-vtu-eck-978918/
Simon Thomson:
https://www.investorschronicle.co.uk/ideas/2023/11/01/is-rtw-s-offer-for-arix-a-good-deal/
"So, although I feel the combining of the two groups makes strategic sense, I would hold out for an improved offer from RTW. Hold."
Poor offer imo, it's just transferring shares from one highly discounted biotech fund to another, not unlocking any value. RTW's track record is highly unproven and they're trading close to an all time low.
Not all NAVs are equal, Arix's is far superior because of the huge cash component. This deal would simply gift RTW an absolute boatload of cash, no wonder they're keen to acquire. The mystery is why Arix board have rolled over so easily.
Why didn't they do a 1 for 1 swap by equalising NAVs and returning the residual cash to Arix shareholders?
Yes if they want to wind it up nothing to stop them issuing a dividend equal to cash, then let RTW make their offer on the remainder. Otherwise giving away that cash is effectively the equivalent of blowing it all on a placing in another fund.
Right now RTW's entire market cap is $240m, so with this deal they about half their quoted value in cash alone, it's almost obscene how good a deal it is for them.
Terrible offer......wondering if directors promised board seats in combined group? Hopefully minorities won't be shafted here like Allied Minds and Metaltiger.
Wouldn't be at all surprised if board were offered sweeteners, doesn't quite add up otherwise. Despite poor offer do think Arix represents excellent value at this SP. Can't see this deal being approved by shareholders, not at least in its current form, and in meantime could well flush out other bidders as it's now or never for them.
Shouldnt post when I'm half asleep and havent had a coffee and havent read the detail!
Chard_Nicks suggestion sounds good - return of cash and then consolidate on an equal NAV discount footing.
In coming up with the 'implied price' of 143p, they've failed to take into account the potential future flood of sales of RTW shares by those ex-Arix holders who don't particularly want to be RTW holders. RTW is quite illiquid (50-odd trades today, but usually less than 10) and has a bid/ask spread to match. Mr Market has anticipated this though, and their SP is already down to $1.06 bid, compared with the $1.1847 they used in their calculation.
In addition retail investors may also be hit for currency conversion charges. There is RTWG, which is £ denominated, but that has even fewer trades and a 10% spread!
Acacia, of course, would be immune to all this...
BTW The presentation is here, including a few words from Robert Lyne, but it's all pre-scripted management-speak:
https://www.rtwfunds.com/rtw-biotech-opportunities-ltd/results-and-presentations/
The 1pm Q&A might have been interesting, if we'd been invited...
Is it legal for one set of minorities to get 143 and others all shares? Thought under take over rules this is not allowed?
Very good point!
I just looked into this and read the following on a M&A Advisory site:
Equality of treatment
An essential requirement of the City Code is that all holders of securities of a target company of the same class must be afforded equivalent treatment. This principle manifests itself in a number of different ways, including a requirement for (i) all information to be made equally available to all shareholders; (ii) comparable offers to be made for each class of equity share capital; and (iii) no special arrangements to be made with any particular target shareholders.
You would have thought that the board and RTW would be aware of this though, so probably are trying to get away with it through a loophole.
Thanks Steeltrader9, very good find!
https://www.burges-salmon.com/-/media/files/publications/open-access/guide-to-public-takeovers-in-the-uk.pdf
I think if this doesn't get raised, it will be worth notifying the takeover panel - https://www.thetakeoverpanel.org.uk/
If anyone here is an Inverstors' Chronicle subscriber, perhaps they could ask Simon Thompson what he thinks about the legality?
With the share price where it is it doesn't feel like a takeover and there is no premium showing at the moment.
If it gets through the RTW share price may fall further as usually happens with all share takeovers. It would have been better to have it as a cash payment.
The chat on the IC site was disabled some years ago. Nothing stopping us from complaining to lse.
Just sent to market abuse. Suggest others write to Lse too,
Please could you look into the proposed all share merger here. One large shareholder has been offered about £1.43 but minorities are being recommended an all share offer.
Also, should directors need to disclose if they have been offered positions in the merged entity.
Concerned minority shareholder.
Good shout Batterseafish, will do likewise. If they were allowed to proceed they'd also become majority shareholders before the vote, enabling them to steamroller a yes vote through, which seems like a straightforward stitch up.
Meanwhile with any luck a significant enough shareholder on the register clock board's plan for what it is and speak up against it pretty sharpish. Market reaction speaks volumes.
The more time that goes on the more apparent what a clanger this deal is. Following RTW it's strikingly illiquid, even fewer daily trades than this. If/when the buyout happens and people inevitably want to exit it's not going to be easy without cratering the price.
It has been quite some achievement since the offer announcement for the value of both funds to noticeably decrease. Normally in a takeover at least one party perceived as getting the better deal will get a boost, but here they've managed to significantly reduce value of both. Well done board.
Write up in the times completely trashing the deal and the arix board.