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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)."
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.
By remaining 63% I mean 63% of current Ord shares plus (100% of) those created from the convertibles. And by greater cost I mean greater as a %: £13m on £88m vs £13m on £139m.
So converting creates 8,343,935 ordinary shares. That is equivalent to 9.65 per cent of the total number of shares in issue. Our 8.3’s have uncovered thirteen larger holders with one per cent or more. Those thirteen hold a total of 91.42 per cent. Add this to 9.65 per cent equals 101.7 per cent and fourteen holders ?
Thanks for your explanation 1GW_, what you say sounds entirely plausible. My below average level of intelligence is not helping me to understand this however.
Skindle - the dilution, if the convertibles are converted, will reduce everyone's % holding of ordinary shares (compared to the current declared positions) because it will create more ordinary shares.
Okay, so if converted, 86,442,534 would become 94,786,469 ? Should we expect more holders declaring their interests in the form of these 23.97 pence convertible shares ? If so, this dilution and diminution could continue for a while.
Skindle, the numbers stay as they are unless or until some of the convertible shares get converted. That extract from the annual report suggests conversion is now at the option of the holders provided that the SPD offer counts as an "offer for the company". If the shares don't convert by 22nd March 2021 then they become deferred shares which the company can buy back for "a nominal value".
So the offer appears to be a gift to the convertible holders and I would expect them all to choose to convert (on the basis of my reading of that summary of the terms in the annual report). As they do, the number of shares in issue will rise and the company presumably will give further 2.9 notices.
The fact that Findel has had to issue a revised 2.9 notice identifying the existence of the convertibles suggests to me that the board and its advisors were unaware of (or had forgotten about) the terms of the convertible shares when the first notice was issued.
So I think we can expect to get declarations from the 1%+ owners of the remaining convertible shares. I wouldn't have thought those who have already declared (ordinary shareholdings) would have to give new declarations just because the shares in issue change, but they would if they deal and would have to use the correct "shares in issue" number at that time.
Understood now thank you. The effect on the share price if all convertible holders convert is the same as a rights issue I assume.