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Majority shareholder to take Fortune Oil private. Fortune Oil, the Hong Kong-based oil and gas company, is set to go private following a takeover offer from its majority shareholder, writes Michael Kavanagh. The latest planned departure of a longstanding junior oil sector player from the London market follows a recommended offer of a minimum of 10p a share to minority investors in a group 56 per cent owned by Fortune Dynasty. The offer from Fortune Dynasty, a joint venture between the Vitol Group and Hong Kong businessman Daniel Chiu, values the company at £259m. The deal offers a cash premium of nearly 60 per cent to Fortune’s closing price of 6.31p on Wednesday. The leading shareholder is also offering a further cash boost of up to 5p a share to minorities should the company be sold on quickly. Daniel Chiu, chairman of Fortune Dynasty, blamed a lack of active trading shares for the bid to take it private. But the apparent generosity of the offer compared with Fortune’s recent share price still leaves the 10p offer well below the 52 week high of 14.5p.
Sitting at the top of the FTSE All-Share leader board today is Fortune Oil (LSE: FTO), which is up around 46% after it was announced that it has been the subject of a bid approach. The suitor, Fortune Dynasty Holdings, already owns around 57% of Fortune Oil and is the biggest shareholder in the company. Under the terms of the deal, it will acquire the remaining 43% of shares in Fortune Oil, with the company being valued at around £388 million. The deal is set to be completed in the first quarter of next year and will be implemented by way of a court sanctioned scheme of arrangement. Fortune Dynasty will pay £0.10 in cash per Fortune Oil share, as well as a contingent entitlement to a further £0.05 per share in cash or loan notes via a contingent value right. Importantly, the deal is being championed by Fortune Oil’s board, who seem to believe that this is the best outcome for investors in the company. Positive News Clearly, the news is positive for investors in Fortune Oil and brings to a close a challenging period for them. In fact, Fortune Oil’s share price had fallen by a round a third during the course of the year but, following today’s exceptional gains, is now flat year-to-date. Given the collapse in oil prices in 2014, this is a relatively good result. Furthermore, Fortune Oil’s recent results highlighted a significant fall in profit. It fell to £9.7 million in the first half of the year, which was well down from the comparable period’s figure of £228.4 million. And, even though last year’s figure did include gains of £214.9 million from the sales of assets, even with that gain excluded it still represented a fall in pre-tax earnings of around 28%. Looking Ahead Fortune Oil also cautioned against significant growth in China for natural gas over the medium term in its recent update, with government policies having the potential to dampen demand, while a slowdown in China’s growth rate could also harm sales in the region. With Fortune Oil being focused on China, this could have meant reduced profitability in 2015 and beyond. So, while many investors may be sitting on losses if they bought shares in Fortune Oil while sentiment was high, the deal for Fortune Dynasty Holdings to acquire the remaining 43% of shares in the company appears to be a sound one. And, with a number of other oil and gas stocks falling heavily during 2014, this could provide investors in Fortune Oil with an opportunity to reallocate their capital to relatively more attractive opportunities. http://www.fool.co.uk/investing/2014/12/18/why-shares-in-fortune-oil-plc-jumped-46-today/
Fortune Oil (FTO) shareholders will have mixed feelings after its major shareholder decided to buy the rest of the business. The shares had halved in value since July when the company reported a fall in profits and scrapped the dividend. Half-year profit slumped, too, so some will welcome this exit route. The optimists, however, will have been excited by the firm's prospects in China. Given the slump in oil prices and Fortune Oil's inability to improve the share price by much, or for any length of time, this is probably a sensible offer for shareholders. Fortune Oil shares have not been above 14.5p since the early 1990s and its promise has never truly been fulfilled. Better to take the cash and find a better home for it. And there are plenty out there. Shareholders will receive 10p per share from 57% shareholder Fortune Dynasty, a company owned by entrepreneurs Daniel Chiu and Dennis Chiu and Vitol Bermuda. They'll also be entitled to a further 5p per share in either cash or loan notes, but only if 35% of the company is sold and at an average of HK$11 within the next 12 months. Expect nothing, and any extra will be a bonus. The deal will become effective in March 2015. "In recent years, Fortune Oil has struggled to gain sufficient interest from investors to maintain a reasonable level of active trading in its shares," said Fortune Dynasty chairman Daniel Chiu. "This has resulted in a disappointing performance for many shareholders, including myself. Since the disposal of the natural gas business in 2013, the divergence of interests amongst Fortune Oil shareholders has become increasingly apparent. "Together with my consortium partners in Fortune Dynasty, we believe a cash offer at a substantial premium to the current share price is the best means of resolving these divergent interests, and provide a means for all shareholders to realise value for their shares in cash." Time to move on. http://www.iii.co.uk/articles/212815/fortune-oil-rockets-takeover-bid
Bruce you may be right, I am not clairvoyant, but what I do believe is that the minority shareholders should not give this lot an easy ride. Also chris211's comments suggest that it is not the done deal you may predict. LET US BE RESILIENT AND VOTE NO!!!
there is no chance of winning a vote against with 56% held by the consortium
Excellent news chris211 thank you. We need too blow this deal in its initial form right out the water and send a message to these opportunists.
It appears having read the offer document that the Consortium already owns 56% of the shares. This will make mounting a challenge very difficult. The BOD says there were insufficient volume. I think we are being done down. However I can see no alternative but to hold for 2 reasons. 1 brokerage costs 2 the possibility of the contingent paper being worth up to 5p a shares. It is true to say that these things are never certain and it could be worth zilch
I am pleased for you nickyg and I respect (though disagree) with your opinion. Like you, I am well up on this investment; however I cannot take this offer lying down and will not unless I am forced to sell. A lot of investors are losing out and there is a chance that we can help these people, plus at the same time up our gains (yes their is self interest in my approach). When you bid for a company you surely must have something in reserve in case of initial rejection, you would not show your best hand at the outset would you??
A new year is approaching fast, and it is time to move on and take what is offered. It has been a basket case from the start, though I was working it out during an idle moment that over 20 years I am some £20000 up on account of regular ups and downs in the share price. There must be tens of thousands who have done OK, and it would have been hard not to have done so. Like everyone else, I was hoping to bank a huge sum when the share price hit £1, and retire. Didn't happen.
Thank you DoubleD7, your affirmation of rejection to this offer is music to my ears, I urge others with the same mindset to come out of the woodwork and raise the profile of minority shareholder resistance. I have a gut feeling that FTO could be monitoring these chats from a past comment I read some days ago, I do not wish to elaborate on the foregoing as I may be way off the mark and completely wrong.
Thank you roger.ed it, is important that momentum is maintained to ensure that us minority shareholders get a fair deal from this lot.
With you all the way intergalactic . Xmas greetings to all, It would also be a shame to not have this interesting BB
Thanks once again Del44 for your insight; you have been quite remarkable with the quality of your contributions. Underneath, I am seething with anger at this takeover move and its associated offer; indeed if I let myself go I would probably be barred from this chat line, thus I have to restrain myself. I do hope that minority investors defy the FTO approach in its current form and remain resilient. It is no more than corporate mugging in my view.
Until the offer document is circulated, we can only comment on the rns of recent....but as the 13.4 Right to switch to an Offer below states...FD can change to an offer only instead. I hope if they (BOD) read any of these boards, they may get a flavor of the complete disappointment at this initial offer with the cvr attachment. But as I say in the 17:57 post.....they may very well make changes or give more guarantees with respect to the cvrs....
intergalactic - i firmly agree with you. We know the underlying value in this share and whilst i understand shatter's disappointment and resignation, i don't share it. If we reject the offer, they are almost certianly going to increase it as at 12-15p the bod are still getting a bargain. We all know that, so any talk of it going back down to 6p is in my opinion scaremongering. We need to stand strong and united in this, most of us have been in here a while and it would be folly to back down now and accept the measly offer. Godspeed my fellow investors
I believe similar words were uttered by Margaret Thatcher to Ronald Regan during some international crisis point. I urge minority investors to dig there heels in and reject this offer. Granted the share price has been lack lustre, however providing their accounts are not creative and reflect the true financial position of FTO we are not discussing a company that is on its last legs. WE DESERVE BETTER!!! MY POSITION WITH RESPECT TO THIS COMPANY IS CASH RICH IF I ACCEPT 10p PER SHARE, HOWEVER I FEEL THAT I AM BEING EXPLOITED, THUS I AM DETERMINED TO MAKE A STAND.
shtter...and a Merry Christmas to you and yours.... This paragraph leaves room for plenty of manoeuvrings in the weeks a head....;-) 13.4 Right to switch to an Offer Fortune Dynasty reserves the right to elect (with the consent of the Takeover Panel) to implement the Acquisition by way of an Offer for the entire issued and to be issued ordinary share capital of Fortune Oil as an alternative to the Scheme. In such an event, the Offer will be implemented on the same terms (subject to appropriate amendments), so far as applicable, as those which would apply to the Scheme and subject to the amendment referred to in paragraph 4 of Part B of Appendix I to this Announcement. If the Acquisition is effected by way of an Offer and such Offer becomes or is declared unconditional in all respects and sufficient acceptances are received, Fortune Dynasty intends to: (i) request the London Stock Exchange to cancel trading in Fortune Oil Shares on the main market of the London Stock Exchange; and (ii) exercise its rights to apply the provisions of Chapter 3 of Part 28 of the Act to acquire compulsorily the remaining Fortune Oil Shares in respect of which the Offer has not been accepted. So, it might yet be simpler to just up the cash bid and save the hassle of a potential knock back in the court!!! HO HO HO........
Good Fortune....another few weeks will tell a tale..
I am resigned to the 10p a share offer ! This has been in the planning by the bod for quite some time and as I said from day one the 5p was always a red herring.. I have been involved in a number of takeovers over the years and rarely do they get close to value for the shareholder, whether it be miners or small oillies ! Perhaps the bod have built in a contingency for a small offer increase but I doubt it. The problem is that if this does not go through, 6p will seem a great price. As it stands Fortune Oil is now dead in the water and I can't see any future value in this company. The pi's are the tail hoping to wag the dog . A blocking vote could be costly if it were to go through!
Morning all. I have followed this board intermittently for the past few years, but have decided to now sign up (due to the situation) and this is my first post. Many thanks to Del44 in particular and others for their research and comments, which have been very informative and interesting. My holding is probably smaller than most here but it's far from insignificant. I have held for a few years now, bought at 10.15ppl so a sale at 10ppl means I won't lose out and have pocketed a decent amount from the one-off dividend. That said I am in no hurry for a return on the capital, even though I had hoped for a quicker return on this investment. Following other peoples comments, out of principle, I will be voting no as I do not like being screwed over. There is a considerable amount of 'smoke and mirrors' with this share, which means it's difficult to deduce a clear transparent evaluation of it, which is probably why it has underperformed. That said, I think we can all clearly deduce that the offer we have is both opportunistic and undervalued and I am by no means going to lie down and accept it
Good to see volumes pick up over @ CGH only part day trading so even better. Could be the broker comment as noted by Del44 or, might (I hope) be summit else of interest. I was thinking (plenty of time on my hands) and now if there was a chance of somthing else coming in from the left field re FTO would this be pre or post formal offer doc. Still keeps the interest up and if FTO was to disappear I would miss it. Festive greetings and wishing everyone a prosperous new year (might be this time) to all posters.
Peculiar then that they have full control whenever they INCREASE their holding in CGH... Not laughable but a sick argument to use for their contemptuous suggested takeover strategy.
Vitol Group has joined a group bidding to take oil and gas storage company Fortune Oil Plc (FTO) private as the world’s biggest oil trader boosts its investments in China. The group, which also includes Fortune Oil managers, led by Vice Chairman Daniel Chiu, is offering 10 pence a share for the 43 percent of the London-listed company it doesn’t already own, according to a stock exchange statement from Fortune Oil. The cash bid represents a 30 percent premium to Fortune Oil’s average closing price over the past three months and values the company at 259 million pounds ($405 million). A successful bid will see Vitol increase its stake to 30 percent of Fortune Oil, which has has interests in oil and products terminals, an aviation fuel-supply business and an 18.6 percent stake in China Gas Holdings Ltd. (384) Traders who own or have access to storage can lock in profits because the oil market has since July been in contango, a situation where the current spot price is lower than the future one. “This is a potential opportunity for Vitol to increase its long-term exposure to the Chinese gas sector,” said Fabian Gmuender, a spokesman for the Rotterdam-based company. Fortune Oil rose 51 percent to 9.50 pence as of 1:16 p.m. in London trading, the largest increase in 21 years. Before the bid was announced, the shares had fallen by a third this year. Fortune’s stock performance has in recent years been “disappointing,” Chiu, the company’s largest shareholder with about 28 percent of the stock, said in a statement. Vitol currently owns 5.69 percent of Fortune Oil directly and 45 percent of a holding company that owns a further 23.2 percent. Fortune Oil Chairman Qian Benyuan said in a statement that the company’s independent directors unanimously recommend the offer. Vitol Chief Executive Officer Ian Taylor, who has been a director of Fortune Oil since 1993, was excluded from a takeover panel considering the bid. http://www.bloomberg.com/news/2014-12-18/vitol-raises-bet-on-china-s-energy-industry-with-fortune-oil-bid.html The deal is been financed by Vitol Energy(Bermuda) Limited Acting As Original Lender..... So it makes sense to Vitol...it makes sense to Fortune Dynasty.. cause they get a great asset for nearly petty cash....at our expense.... Merry Christmas to you all...and a very happy New Year....:-)
BOA targets HK$17 for CGH...with gas growth... Bank of America Merrill Lynch, in its recent research report, reiterated a Buy rating on CHINA GAS HOLD (00384.HK) +0.640 (+5.644%) Short selling $7.51M; Ratio 1.119% with a target price of $17, implying 24x/19x FY15/16 estimated P/E. The research house expected the stronger-than-peers' gas sales growth and new residential connection could support the uptrend on ROIC, leading to a higher-than-peers' valuation. But our biggest investment, in our now investment holding company, has huge upside potential even allowing for the recent 25%+ fall in CGH's sp and the slowing gas market in China. (Slow relative to China only)..... And the bod of FTO, both independent and non independent directors...HAVE APPARENTLY NO CONTROL OVER THE SAID UNDERLING ASSET!!!!. Does anybody else find this laughable? (I bear in mind all financial positions held by investors) http://www.aastocks.com/en/stocks/news/aafn-news/NOW.645000/1
U r the master of research why aren't u on the bod