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Thetrotsky, I agree with most of what you say , but they only need to buy another 21%-23% to take control assuming 47% ish don't take up an offer.
Once they have control they can let topps carry on but with most of what MSG wants.
Will be interesting to see what happens after the trading up-date and what comes out of the ADM.
I don't know. I reckon the take out price would have to be north of 80p. The business is doing well and it's likely going to be able to increase its profits and dividend payout going forward now that it's debt free and been able to put a number of one-off costs behind it e.g. acquistion costs.
So, it's probably going to cost MSG north of £110m to buy out the shares it doesn't already own, and for what?
Yes, MSGwould be buying an established UK business with a large, existing distribution network but it's unclear whether it would be able to sustain that business alone without significantly increasing its own production capacity in Poland or retain existing third party suppliers whilst augmenting the offering with its own products. It's one thing to seek an additional outlet for existing unutilised production capacity and quite another to increase production capacity to meet additional demand over and above what's currently available i.e. if Cersanit was to aim to meet 100% of Topps demand. Cersanit isn't a traditional discounter; it's a high end supplier (it wouldn't want to buy Topps to simply ramp up high volume, low margin tile production).
MSG and Solowow no doubt have the money but I'm really not sure whether there is any business logic in buying the 70% of Topps they don't already own i.e. they'd probably end up overpaying for what they need. If they could buy the remaining 70% of Topps for (say) £50m (about 36pps) then there might be some logic in them launching a bid but any shareholder who'd now agree to sell their shares for (just) 36pps would be a fool. There's a complete mismatch between what MSG would want to pay and what other shareholders might accept (not even in the same ballpark). It's also not clear whether Cersanit could supply Topps with (say) 30% of its tile volumes whilst buying the remaining 70% from other suppliers. Ideally Cersanit would want to just supply Topps's lower volume, higher margin business whilst Topps's other suppliers were left to supply its higher volume, lower margin business. Cersanit are unlikely to want to move down market and Topps's existing suppliers are unlikely to want to give a competitor a free leg up (and lose the opportunity to sell their own higher marging products). It just strikes me that Topps is too big for Cersanit's tile needs and that its existing show rooms are too small to offer Cersanit's wider range of ceramic products; Cersanit would just end up reducing the number of Topps outlets and/or moving to larger premises.
Have just bought in..
In simple terms, Cersanit want to sell more tiles in the UK. It appears that this is an almost untapped market for them. They appear to manufacture and sell other ceramics such as Toilets, but keeping with Tiles..
I think one way or another, Cersanit will get their wish. They have tried a cheaper approach, by asking nicely, but this looks set to be voted down. I really cant see them opening up in competition, when it would just be cheaper and easier and quicker to buy out Topps. I did a little digging in to Cersanit, and it turns out it was taken private by serial self made investor Michal Solowow. If you read about his profile and past, this is what he does. Take things private. The guy is worth $6.2 Billion. Worth a punt in that case I think. I think UK equities are so cheap for foreign investors that it would be a good buy in any case, but if you are guy who owns a the tile factory, then this is just an add on for pocket change.
https://www.forbes.com/profile/michal-solowow/?sh=4703d3474dff
Not quite sure where we go from here. It doesn't strike me that MSG's Polish subsidiary is a discounter (based on the BoD's comments about the pricing of their products when they've looked at sourcing product to sell); so I doubt that MSG would be looking to compete head to head with Topps on price. Buying Topps to turn it into "Nexterio UK" would appear to be an expensive proposition - not sure how Topps's existing suppliers would react to a competitor taking over Topps (let's just say that it might not prove to be a smooth transition).
Personally, I think MSG have the bigger headache here. They can't increase their shareholding without making a formal bid and I don't think the BoD would even consider an offer of less than 70-80p. They can be a nuisance but as long as the BoD has the support of the other main investors and is able to maintain the current upwards trajectory then MSG's current self-serving propositions are going to fall on deaf ears. Despite the current economic backdrop, when house sales start to fall, DIY starts to rise and vice versa, and Topps is now well placed to benefit from either. Selling their holding might cause the share price to drop in the short term but, with a 3.6p dividend, I think any fall would not prove long lived and just give value shareholders the opportunity to pick up a (potential) bargain. Even if the general market was to decline in the next couple of years, MSG's proposals offer no incentive to other shareholders to support them.
Bottom line, I think MSG either launches an outright bid or becomes a silent investor. Given the prospect that Nexterio will be launching an operation in the UK, I think the BoD should be able to mount a pretty convincing case for MSG not being given any representation on the Board in any shape or form (given the realistic prospect that confidential business and contract information could end up being shared with a direct UK competitor)
Well this looks like a real dog fight. The RNS say MSG owns Nexterio, a retailer of tiles and associated products with over 40 outlets in Poland, which the Board understands is being prepared for a launch into the UK. A new company, Nexterio.UK Limited was incorporated on 22 November 2022,
Now MSG owns almost 30% of Topps so why would they then want to try and open / build a new brand in the UK with all those costs etc when it would be cheaper and quicker to just buy out the rest of Topps and change the name to say Topps /Nexterio.
Not rreally sure whats going on here or where the SP will now go. If MSG lose this vote will they now sell out their 30% stake in topps and push ahead with Nexerio in which case the topps SP will crash to say 30p-35p.
Any thoughts.???
So with an AGM EGM to discuss The Requisition Notices have been served by Lynchwood Nominees Limited on behalf of MS Galleon GmbH ("MSG") which currently holds approximately 29.9 per cent. of the Company's voting share capital..
Where does this go, I guess that if Galleon don't get their way at this meeting they will then move to control all of Topps with a 75p ish takeover within a few days of the meeting, and why wouldn't they.
Could soon see the SP sky rocket to 75p-£1.
I am guessing that this is connected with the attempt to oust the chairman?
Anybody know why this stock is outperforming everything else in the sector? It's a great little company, but I'm surprised at the interest.
For those that intend to vote their shares at next month's AGM, please note that the BoD's default recommendation is (most definitely) AGAINST resolutions 16-18. I highlight this because when I was voting my shares yesterday on Interactive Investor I noted that the BoD's default recommendation was incorrectly stated to be FOR the resolutions!
I emailed Rob Parker, the investor contact at TPT, yesterday morning and recevied a response thanking me for pointing out this error yesterday afternoon. So, if you've already voted and inadvertently voted FOR resolutions 16-18 you still have time to amend your vote.
I'm sure that the BoD knows full well that fending off a bid (at an acceptable price) from Galleon would be difficult to resist but, as it stands, Galleon's proposals would not be in the best interests of the the other 70% of shareholders. However, an all-out bid by Galleon may not be plain sailing. Vertical integration has it merits but might be counterproductive if Topps starts to lose market share as a result (is you base supply on what you produce rather than on what ciustomers want). Also, Galleon has to consider what impact a takeover of Topps might have on their existing UK sales and the contracs they have with their existing UK customers (they might just end up losing as much as they gain). So an all-out bid may not be as staightforward as at first it might appear.
Agreed- and I think its 'all in'. Making a bid that isnt a knock-out and then allowing bid to lapse/walk away means they cant come bakc for another 12 months under the COde. So if you were Galleon why wait 12 months allowing Topps to increase its defences, etc....go hard, go now!
55-60p would be initial sighting shot.. sighting shots are always based off settled share price pre-announcement. Roughly average of last 90 days I'm guessing is around 4243p, so 60p is 42% premium just for starters. I dont think there will be any takers at that level, so 70p + is a poss.
They want to put their own products in stores, adding tens of millions of turnover to existing production businesses.
BoD better start asking around for new posts IMHO
I very much doubt that the BoD, or their backers, would currently be interested in even considering a bid below 80p. Despite the current macroeconomic climate the business is holding its own and its prospects are on the up (it's been a long time in the wilderness but it does, at last, appear to have put previous missteps behind it - with the benefit of hindsight, borrowing money to do a capital reduction in 2006 proved to be a disaster - and buying complimentary, bolt-on acquisitions is bearing fruit).
Personally, I think Galleon have the bigger headache at the moment. It seems highly improbable that its propositions will find favour with any other shareholders at the AGM (like turkeys voting for Xmas) and they will be forced to consider either putting up or shutting up. They are making quite a nice return on their investment already but, if they want to persist with their daft proposals, then they will have to go all in and at 55-60p they can forget it.
Good call fevertree, definitely a case of watch this space and sit tight, could get very interesting in the next few weeks..
Agreed ! I have pondered more on the Galleon announcement.
1. Galleon may have been wrong-footed by Topps going public & announcing they had backing of c40pc of existing s/holders. So will need to regroup and decide next move.
2. You can argue that Galleon has been massively stupid trying to oust directors and force through supply agreements based on shareholdings, that were bound to fail., for reasons given by Topps. I very much doubt that Poland's richest man is stupid, and he would have been advised that such crude tactics are unlikely to work.
3. Galleon will know this will be hugely disruptive to the management of Topps and a real distraction from the day today running of the company - board will now have to convene daily, with adviers etc.. Huge commitment for a small cap.
4. Makes no sense at all to have built a 29.9 pc stake in a successful business to cause max disruption to the business operations (customers, suppliers, creditors , banks etc) that ulitmately harms your own shareholding and your commercial relationship with the company.
5. So why make this move? Well I think it is a pre-bid ploy to try & flush out institutional level of supportfor Topps BoD (now he knows 40pc back the board).before calibrating his first offer price ! Under the put up or shut up rule in M&As under the Takeover Code Galleon will have to be v. careful about what they say...otherwise they could scupper any potential bid... hence at the mo, they are merely requsitionig an EGM to replace directors with their nominees....
6. This is a hostile bid; it will go live at some point; opening sighting shot 55-60p?
Yep, there could be a war over ownership. Topps have fired the first round though - they have let it be known that 39% of shares will be cast against the resolution by holders on the boards side. If a hostile bid was made it would have to be large enough to win them over.
So this is getting very interesting, The Requisition Notices have been served by Lynchwood Nominees Limited on behalf of MS Galleon GmbH ("MSG") which currently holds approximately 29.9 per cent. of the Company's voting share capital.
So they want topps to buy more stock from MSG 's company and Topps don't.
Hence the move to oust those that don't want to do what MSG want. with 29.9 % already owned by them could there now be a full bid of 60p-80p to take Topps out. ?
Just bought into this company today see how they do before topping up more
Really great set of numbers and a business firing on close to full cylinders; hard to think what else they can do to please the market!. Worth noting that this morning over 2m shares have traded and the share price has only been marked up 10pc, barely back where it was end of Sept, and still 30% down over last 12 months...., And this despite Poland's richest man holding a huge stake. Value will out but I shake my head in wonder
Really impressive set of results in my opinion. Market may focus on the drop in cash but with a reduced store estate and online working well, its looking great for 2023. I would expect them to hit 1 in 5 by 2023. Which doesn't rhyme unfortunately! Maybe 1 in 4 by 2024?
The quality of the business isn’t reflected in the share price in my opinion.
I get the fears over energy costs to make tiles and recession concerns but Topps management do seem to be navigating those issues pretty well so far. They have shrunk estate but increased sales and expanded into new sectors.
A P/E of under 9 times historic earnings for a growing, profitable, dividend paying company with quality management does feel too low.
I suspect Steve Moore who is writing for TW ( and isn’t as sharp) will focus on headline stator metrics which don’t look as strong and ignore the 16% dividend hike which is a strong vote of confidence. It equates to an annualised yield of 9% at current share price.
Christ, somebody either knows somethings afoot or thinks they know somethings afoot looking at that last trade that last trade definitely a buy looking at the price stamp. GLA...
Looks like Tom W is getting his teeth in to this one.
I'm not a big fan of his language and manners at times, but respect his sharp analysis skills.