London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
The reason for the 16/19 ratio is based on the difference in the number of shares in issue for the two companies as stated in the RNS …the exchange ratio of 16 new Taptica shares for each 19 RhythmOne shares set out above is based on 68,521,997 Taptica shares in issue and a fully diluted share capital of RhythmOne of 80,947,880, in each case as of 29 January 2019, being the last practicable date before release of this Announcement.
i.e. 16/19 = 0.84 and 68521997/80947880 = 0.84
Short of a very positive 3Q trading update and year end guidance from R1 can anyone see a good reason why TAP should pay a premium for R1 over and above this 16/19 ratio??
Thanks for posting Radium. Very interesting and explains the 16 for 19.
I agree that Tap is better valued particularly on the face that Tap has been steadily increasing profits year on year.
The interesting thing about R1 is the forward earnings for the next 2 years are set to grow exponentially as are the profits. The risk would be, can they create that profit? Potentially I think R1 can give as good a return as Tap, but Tap is a safer play.
Radium, the reason why 16/19 works in terms of the shares in issue is that they have designed it so that it is a 50:50 merger (each company ending up with broadly 50% of the merged entity) - so you have to factor down for the greater number of shares in issue of Rthm.
But 50:50 is a consequence of the valuation negotiation, it is not the reason why the ratio should be 16/19.
The most obvious reason why Rthm shareholders might expect more than 16/19 is because of market caps ahead of the leak of the M&A talks. Rthm was worth more than Tap in market cap and so Rthm would expect to end up with more of the merged company, if it were a genuine "merger of equals" with no side getting "control" and a broadly equal split of key board and management positions. Then if Tap is seen as the acquirer and is getting key board positions then you would expect Tap to pay a premium to Rthm shareholders for that control.
Personally I think the 16/19 ratio was negotiated based on market caps ahead of the December 4th crash. So when Tap was over £3/share and Rthm was under £2/share. 16/19 x £3 = £2.52, which would have suggested a 25%-30% premium to Rthm shareholders which could be considered reasonable for ceding control.
Tap have doubtlessly been arguing that the fall in Tap shareprice was a temporary "mispricing" due to the CEO leaving and then the uncertainty over why the share buyback had been stopped. So Tap would have been arguing that the ratio agreed before the crash should stand and reflected "fair value" of the 2 companies. Rthm will have been arguing that the ratio should be rebased to take account in the fall in Tap market cap.
Given we haven't had an actual recommended offer rns yet, my guess is that negotiations are continuing to try to reach agreement on an offer that the Rthm board feels it can recommend to Rthm shareholders. Given that the Tap shareprice has not recovered to anything like £3, even though the market now knows that there were genuine M&A negotiations going on which would have justified the pause in the Tap buyback, I would guess that the Rthm board will be holding out for an improved offer which reflects a premium for control, or else restructure the deal so that Rthm gets control and key positions in the merged company.
Radium,
Maybe TAP announced their buy back in the hope the sp would increase beyond the level it did, approx 225p, so mcap approx £150m??
stt1, I would prefer that you do not reply to any of my posts. Whereas I sense that you are a lonely person needing the daily attention that posting on bulletin board provides for you, I personally, find you obnoxious in the extreme.
1GW, I guess we are all hoping than when/if an offer is formally presented it will be an improvement on that currently published. Thanks for summing up your thoughts. Always well considered presented.
Good call makes a lot of sense that this current offer might have been the proposition before the TAP sp crash. If the offer was made public a month or so ago R1 holders would have jumped on the chance at that time and combined with trading updates the sp would have rocketed. Now it really does look like R1 holders are losing out by accepting a dilution on a company with a smaller market cap.
It would have been better if R1 acquired Taptica IMO.