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AGM was to start at 9.30am, I'm hoping they would have voted down them resolutions by now.
A dramatic rise in the share price. Sell everything else you have got and pile in to Topps. What could possibly go wrong? ;-)
So what's going to happen today then ?
So, if you'd like to assume that the BoD are successful in defeating their main shareholder's wishes, what happens next? If they have already started a process of building a new brand in the UK, would they not seek to fund that in part by releasing cash from their holding in this company? If they did that at a rapid rate, things could turn nasty quite quickly.
Couldn't they?
May I just mention that the meeting is an Annual General Meeting (AGM) and not an Extraordinary General Meeting (EGM).
In other words, don't panic!
In fact, I am thinking of Topping up before the meeting.
60p??? you're 'avin ah giraffe ain't ya. 90p would be baseline for me.
I agree, I think 60pps would be very modest given the business prospects and that PIs would be daft to accept such a low offer.
60p is very modest given the recent performance. Something to pay heating bills, I suppose.
sp looking a bit lively now???
Hi The Trotsky. I wouldn't be surprised if MSG put in a bid say for 60p and many shareholders sold to them before the deadline which there normally is.
Then the bid in total failed but because MSG still ended up with just over 50% of Topps due to a large number small shareholders selling to them , MSG would then be the largest shareholder and in control even though they didn't own all the shares. With 51% they can call the tunes.
Only if it's willing to offer over 80pps. Despite the share price dropping this morning (bit bizarre - energy costs undoubtedly will have some impact on the business but the tiles aren't being manufactured here in Europe for the most part) I think the optics for a successful bid below 80p must be zero.
Also, we shouldn't forget that energy costs will be affecting Cersanit's production costs in Poland and launching an outright bid against a background of high energy costs and likely worldwide recession is the short/medium term, along with the investment needed to transform Topps into Nexterio UK, now may not be the time to launch a bid. Some investors might accept 50-60p now (in the expectation that Topp's business and share price will not be immune to recession) but Topps is well placed to ride out any short term problems and rapidly recover. I think Topps now offers good, long term value and dividend prospects, and shareholders shouldn't allow themselves to be shortchanged by MSG.
Dartron, Imagine supplying a business that is wholly owned by a competitor that has one eye on taking market share off you (worldwide). Also, these days, retailers like suppliers to share business data with them (purchasing power); it could give MSG, from their perspective, an unwanted insight into their business operations. There's lots of sound business reasons why Topps's existing suppliers would want to find alternative UK outlets for their products (there are alternative retailers out there). I think it's a wholly different proposition to trying to persuade Topps to source Cersanit products.
Bottom line, if MSG was to acquire Topps then I think it's likely that Topps would end up with a (much) smaller share of the UK tile market over time with, perhaps, a wider product range; the question then becomes one of whether the cost of building Nexterio UK from scratch (with the optimal outlet size and online presence from the start) outweighs the likely value destruction that would occur if MSG acquired the remainder of Topps and transformed it into Nexterio UK. QED I think MSG would much prefer to pay 50-60p than (say) 80p and save itself an additional £30m-£40m on top of what it might cost to transform Topps into Nexterio UK.
So here's a thought, if MSG launches a bid before EGM that would put cat among the pigeons for sure. Obv bid timetable would need to be adhered to but....
So do we think MSG launches a bid ?
Hi, I still think the supply scenario you mention is unlikely. In the majority of cases for general retail, it is the buyers that have the control not the suppliers (especially for unbranded goods). If you are reliant upon Topps sales for 15% of your revenue, are you really going to be able to play hard ball, or even want to object? As long as those orders continue, why should you worry. I would of thought there must be plenty of suppliers that could also fill the void if one supplier dropped out. I bet there are plenty of suppliers of high volume all round the world. MSG may have other contacts that Topps do not. I dont see this as a big issue, the sourcing of product, however im no expert, so your point is one to consider.
As an after thought, if this scenario were to be an issue, MSG could already be sounding out other suppliers, and may therefore have a contingency?
Check this link, Some of the top 25 producers. Mexico, Brazil, Spain
https://ceramicworldweb.com/en/economics-and-markets/worlds-top-ceramic-tile-manufacturers
I still think MSG is between a rock and a hard place. I don't see their proposals being passed at the EGM and, despite all the kerfuffle, Topps's business is going from strength to strength, which means the likelihood of an opportunistic bid at (say) 50-60p highly unlikely to succeed. Without access to Topps's BoD, MSG is not going to glean any business data that might help them launch Nexterio in the UK. If they sell down at the current price, I believe MSG would do so at a loss. So, unless MSG is willing to launch a bid above (say) 80p, then I think MSG may just well stick and bank the dividends.
Yes, MSG has the money to launch a bid at, or above, 80p but, from what I've read and understood, I'm still not convinced that acquiring Topps would actually meet their needs. If, as I believe, Cersanit is looking to get a piece of the high end tile market in the UK, then buying Topps to achieve that would appear very hamfisted. I think existing Topps suppliers would look to leave in droves (I don't think they'd want to supply a business controlled by one of their competitors, particularly if they might be expected to share business information - it could put them at a long term competitive disadvantage) and MSG would be left owning a business that operates in a different market niche. Topps is not a high end tile supplier and it isn't really set up to sell other ceramic products (its stores tend to be small with a relatively small product range).
Dartron, The conflict of interest would lie between Cersanit and other Topps suppliers. If MSG took Topps private then I could foresee Topps's current suppliers looking to sell their tiles thru other suppliers instead. Cersanit is a competitor and there are many sound business reasons why other suppliers would not want to supply tiles to a retailer wholly owned and controlled by one of their (major) competitors. It remains to be seen whether Cersanit can, or would want to, supply 100% of Topps's tile sales e.g. would it need to build additional production capacity in Poland, high volume low margin (and vice versa) considerations etc. As I say, if MSG bought the remainder of Topps at (say) 80p I could see value destruction following because Topps may prove too big for Cersanit's UK needs. It's one thing to supply 5-6% of the UK market (if Topps was to buy 30% of its tiles from Cersanit as MSG proposes) and having to try to supply 19-20% of the UK market if other suppliers upped and went elsewhere; in all probability Topps's share of the UK market would decline if MSG acquired Topps. Also, does Cersanit want to be a supplier of high volume low margin tiles or the opposite. Obviously Topps could offer Cersanit the opportunity to sell other ceramic products but its current retail outlets are too small, so a lot of investement would be needed to "right-size" Topps so that it could offer an expanded product range. So, at the end of the day, it becomes a question of which costs less - starting a new UK business from scratch or downsizing an existing UK business. The latter option may prove cheaper if the purchase price is right but I'm just not sure that 80p would be the price that MSG would want to pay. With Topps's Q1 sales up 10%, it's going to be difficult for MSG to persuade Topps's other shareholders that they should accept less than 80p.
Undelines strong fundamentals of the business. Rob Parker's comments, given the macro backdrop, perhaps hint at trickier first half, given energy costs etc but sounds cautiously confident not for FY. Doesnt change things re MSG in my opinion. Hard for MSG to point finger at poor management when they seem to be doing a decent job. As the EGM wont get passed what is MSG's next move? If they cant agitate change , options appear sell down or bid. Place your bets
I am a holder and bought in on the basis of (1) strong business fundamentals (supported by performance data) (2) excellent financial profile: debt free, decent cashflow, good dividend (3) Solowow stake....in that order.
Professional investors and analysts regualrly misunderstand how mucha business is worth to others in an industry, ans the market is littered with examples of analysts failing to asign proper worth to a business and then scrambling to change their analysis when predator pounces. The second point is that Solowow is an entrepreneur not a professional manager , so more like a Mike Ashley or Lord Hanson, so he will have 'gamed' most of the outcomes after calling for teh EGM. Bernie Ecclestone paid good money years ago to float idea of floating F1 only to shelve it once he has flushed out who among the F1 teams would oppose him...MSG have done just this by this move giving Solowow real time data on which the level of institutional support at current levels for management, and it hasnt cost him a pfenning as yet.
So on to the issue of does he sit there with current stake or go for broke. The calculus an entreprenuer looks at is likely to focus on if I wnat to enter the UK DIY tile market how much would it cost me to build a business from scratch and get a brand name. To build the retail and online distribution reach of Topps, to get access to the customer database & the business intelligence within the group; to start from scratch with suppliers; to buy sites etc...in effect to replicate Topps would take years, cost millions, and have no guarantee of success. So much easier to buy the whole show now whilst sp is trading at close to a 5 year low, after the current management team has done all the hard work!
Worries about overpaying fail to recgonise what he no doubt recognises that institutions will prefer cash bird in hand if price is calibrated correctly than promise of future jam from current management. So Solowow 'overpays' - does he care? Of course not, because he can sit on the business and do what he likes once he owns it. If he heavily incentivises key management to stay why wouldnt they- win win for them. And whats to stop Solowow expanding Topps and then at some future date when markets are booming relisting the whole show.
TheT, I don't see how there is a conflict of interest when the company is privately owned - they can do what they want.
I dont think other suppliers will have much sway with either party.
Its not necessarily over the odds at 80p, if it unlocks value in both companies for Solowow - Both of us are not able to see his whole hand. I also think Cersanit want to supply 30% to Topps, where as you phrase it as a problem. The business rational in one line, is that it opens up various opportunities for an already large conglomerate. These people will know the situation in every European country regarding who's who in the ceramics world. Maybe there are other parts of this bigger picture we dont know about. I should say, I'm not expecting a fast conclusion. Shares bought in my pension, and keen on buildings materials sector anyway. I value your input, and take on board your comments. Thanks.
JedClampit, To increase their holding above 30% takeover law requires them to make an offer for the whole company (they can only then force through the sale at that offer price if they control 90% or more). They could indeed first look to acquire 20-21% from another investor but they'd still be required to make an offer for the remainder of the shares on the same, or better, terms. So, unless there's an investor out there now willing to sell them an additional 20-21% on the cheap, they are going to be forced to pay the "market rate" if they want to take control. There are also rules pertaining to "concert parties" that (ought to ) prevent them from circuventing the above rules.
Darton, I don't disagree with MSG simply buying Topps as an investment having its merits but it lacks business rationale. If it remains MSG's intention to persuade Topps to buy 30% of its tiles from Cersanit then they have all the same prospective conflicts of interest to deal with that have been outlined previously and those conflicts of interest won't disappear if MSG buys Topps as an investment. The fact that MSG are trying to persuade Topps to buy 30% of their tiles from Cersanit actually now makes it improbable that they are looking at Topps as simply an investment - if I was a Topps supplier I wouldn't trust them to run Topps independently from Cersanit given the current fracas. The one thing to know about billionnaires is that they didn't make their money by paying over the odds for a business simply because they could afford to do so. If MSG was to hold Topps as an investment, it only really makes sense if they retain their holding at its current level. I rather think that MSG may have made a misstep; they should have made an offer when Covid struck but now its valuation is rising and they are facing the prospect of having to pay more for control of Topps than they would like and that's perhaps why they've now served the requisition notices. MSG want to dampen the valuation and muddy the waters - hopefully most shareholders are wise to this.
I think buying Topps, at the right price, could be a great strategic move for MSG but given the possible conflicts of interest, the potential need to expand production capacity in Poland to cater for higher volume, lower margin tile ranges in the UK (to replace existing Topps suppliers who may no longer choose to supply Topps if MSG takes control), the potential need to reduce the number of Topps outlets if they only cater for Cersanit's existing tile range and/or the potential need to increase the size of Topps's outlets to allow for a wider range of ceramic products, then acquiring Topps will likely to result in value destruction (for MSG) in the short/medium term. Obviously starting a new UK company from scratch, marketing costs etc. is not cheap and the potential value destruction in Topps to "right-size" it for Cersanit's needs may cost less but "over paying" to acquire Topps doesn't make it cheaper ;-)
The risk/problem is losing that controlling interest in the company.... but, it's all about making money I suppose.
TheTrotsky, I feel more optimistic about this.
MSG buys Topps, you ask for what? But then go on to say that Earnings are increasing, and the company is on a good footing. Why would you not take this private? You dont have to change the structure much, you could keep it running as it is, but buy 30% stock from Cersanit - which is what they are asking for. This would give you options to penetrate the UK market as it evolves (high end / low end), and even dictate terms to other suppliers. I dont see any of this as a problem or negative outcome for Solowow. The valuation of Topps is historically low, and many UK equities are targets for overseas buyers. You seem to be looking at it, like it would get bought then ripped apart and then broken, when I say just a change of ownership and adjustment of supply chain. I think for Solowow, this offers upside to both investments. He must understand the tiles businesses well. At present the only issue Topps have with the proposal is that it is not in the interests of shareholders and doesn't quite fit their business model. Both of these are the benefits for the buyer.
Regarding the cost, if you have the money, and you think there will be a return, whats the issue with paying around 80p for the other 70%. Having checked my analyses platform the median broker consensus (of 2) is 80p. The highest is £1.00 target for 12 months. The guy has 6 billion. What else can he do with that money. His hobby seems to be buying building materials firms. Im sure its worth more to him than most other people. Maybe it enables further expansion in the low end market - possibly even accross Europe. Looking at his purchases, he has waited for valuations to come down (not bought since 2018). I really think he will have a go at this.
Apologies if I'm over simplifying things, I am not a M&A expert, or usually an investor of retailers. The deciding factor was the person, Solowow I think hes a smart cookie. I see minimal downside risk to test my thesis, and have only bought a few thousand shares. First time I have bought due to analysing that a TO or even speculation of one may occur. Happy to own Topps at 47p currently and enjoy the show.
I think the talk of being a UK competitor is just posturing, possibly to reduce speculation of a TO at this point.
Would be amusing if tpt did a share offer of 200m shares, thus forcing msg to prop them up rather than face a dimunitive holding and then get them to pay again for a takeover.
I think it's easier for the competitor to have tpt flogging their wares than to go to the expense of a takeover. I think it would be easier for a competitor to takeover tpt rather than try to establish itself here from nothing, as tpt already has everything in place.